The syllabus says: |
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Examine the impacts at a variety of scales of trade barriers, agricultural subsidies, bilateral and multilateral agreements, and transnational corporations (TNCs) on the production and availability of food.
an introduction to food production and markets: the impact on people
Below is a video from VOA English. It is designed for people learning English. It describes the status of food worldwide in 2012. Note: You can speed up the video by clicking the settings symbol at the bottom right and choosing speed - 1.5 times is about regular speech.
the production and markets of food
Food is not just a primary product. The production and marketing of food fits in to all of the four sectors of an economy:
The factors that affect the production of food are wide ranging. As well as the physical conditions of food growing, such as soil, climate, weather, labour and drainage, there are also political factors such as trade barriers, farming subsidies, transnational corporation activity, alternative uses for foodstuffs (such as biofuels) and agreements between countries and/or companies to trade in specific food products. These all combined to create the conditions for the 2007-8 food crisis, which is the case study at the end of this page. Note that this is a separate issue from the 'recent famine' required by the IB Diploma Geography syllabus, and does not directly appear in the Guide.
The production of food refers to the amount and type of food being grown and processed (manufactured) around the world. It also includes where the food is produced.
The market for food refers to the way in which food is sold. This includes the price, scale and location at which food is sold.
- Primary: Food is a raw material, taken directly from the Earth
- Secondary: Food is almost always processed in some way, such as refining sugar
- Tertiary: The vast majority of food is sold; there are very few truly subsistence farming communities today
- Quaternary: The development of genetically modified strains of food is today controlled in laboratory conditions (see the SuperCow for further evidence of the research and development of food)
The factors that affect the production of food are wide ranging. As well as the physical conditions of food growing, such as soil, climate, weather, labour and drainage, there are also political factors such as trade barriers, farming subsidies, transnational corporation activity, alternative uses for foodstuffs (such as biofuels) and agreements between countries and/or companies to trade in specific food products. These all combined to create the conditions for the 2007-8 food crisis, which is the case study at the end of this page. Note that this is a separate issue from the 'recent famine' required by the IB Diploma Geography syllabus, and does not directly appear in the Guide.
The production of food refers to the amount and type of food being grown and processed (manufactured) around the world. It also includes where the food is produced.
The market for food refers to the way in which food is sold. This includes the price, scale and location at which food is sold.
farm subsidies
What
Many countries impose rules on imports and exports with other countries - these are tariffs and quotas. Although the GATT and the World Trade Organisation have rules that are designed to prevent such protectionist policies, agriculture is an area where the rules are relaxed or even ignored, allowing countries to subsidise their farmers. This means the countries pay their own farmers to produce food, rather than allow other countries to compete equally with them.
A trade bloc is a group of countries that allows free trade between members, such as NAFTA or the EU. Most trade blocs impose rules on countries outside the trade bloc. This can encourage farming subsidies because countries need to protect their farmers from other farmers who might produce cheaper food.
The most famous example of a farming subsidy policy is the Common Agricultural Policy (CAP) of the European Union. It's important to note that most richer countries around the world operate a farm subsidy, including the USA (which increased its subsidies after the 1994 creation of NAFTA). The CAP worked between the Second World War and the late 20th century by providing farmers with:
Many countries impose rules on imports and exports with other countries - these are tariffs and quotas. Although the GATT and the World Trade Organisation have rules that are designed to prevent such protectionist policies, agriculture is an area where the rules are relaxed or even ignored, allowing countries to subsidise their farmers. This means the countries pay their own farmers to produce food, rather than allow other countries to compete equally with them.
A trade bloc is a group of countries that allows free trade between members, such as NAFTA or the EU. Most trade blocs impose rules on countries outside the trade bloc. This can encourage farming subsidies because countries need to protect their farmers from other farmers who might produce cheaper food.
The most famous example of a farming subsidy policy is the Common Agricultural Policy (CAP) of the European Union. It's important to note that most richer countries around the world operate a farm subsidy, including the USA (which increased its subsidies after the 1994 creation of NAFTA). The CAP worked between the Second World War and the late 20th century by providing farmers with:
- guaranteed prices - a minimum price that would be paid to farmers for whatever they produced
- guaranteed markets - if the market didn't wish to purchase the entire food stock, the government would provide the minimum price instead
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Impact on production
The result of the CAP was an overproduction of food, called lakes (for liquids like milk and wine) and mountains (for solids like butter or corn).
Impact on markets
This led to accusations of food dumping which distorts local markets. Look at the excellent graphic here for further information.
The theoretical situation is as follows. Production within the member countries usually increases, because the farmers can compete effectively with other countries as their foods are now sold more cheaply. This means they are likely to be able to sell what they produce in large amounts. However, if they produce too much, they attempt to sell it cheaply on the world market. (This applies to large TNCs who act as 'middle men' in those nations, not individual farmers themselves.) Poorer countries buy the food as it is cheap, which then lowers prices for food in those low income countries. The result is that they are forced to produce more food in order to maintain their income, but this is unsustainable. The final result is that farming becomes unprofitable and farmers move into other jobs, resulting in a drop in production in those countries. However, look at the resources towards the bottom of this page for further information about the actual amount of crops being produced worldwide.
restrictions on food imports and exports
What
Individual countries may decide to restrict trade. Also, trade blocs are responsible for encouraging free trade between members, but restricting trade with other countries. They impose
- Tariffs - extra taxes on food imports from other (non-member) countries
- Quotas - limits on the amount (either number, weight or value) of imports from non-member countries
Impact on production and markets
There is an excellent graphic here - it's called 'Restricted Market Access'.
Issue 1: Decrease in production
When tariffs and quotas limit the imports into a country, they also limit the exports from other countries. This means that the exporting country cannot sell what it produces, and so it will either have to sell it more cheaply to another country, or it will have to reduce production. If the trade restrictions are on food, the exporting country will not be able to sell that food, so it will probably reduce production. This means that farms become unprofitable and overall food production decreases.
Issue 2: Specialisation
Alternatively, the country may begin to specialise in a crop that it can sell on the world markets, which means that they become reliant on that crop. If world prices decrease for that crop, the country can be quickly reduced to having to take loans to meet its basic needs.
Issue 3: Selling at an even lower cost
If tariffs are set, this means that the cost of the food to the consumer within the importing country is very high. Therefore, to make it an attractive product, the producing country must reduce their selling price. Therefore, the producing country makes less money and is stuck in a cycle of poverty. It must produce even more of the most high-cost product it can make, which leads to specialisation and vulnerability to market fluctuations.
bilateral and multilateral agreements
What are bi/multilateral agreements?
These can be between suppliers and producers regardless of government involvement. The ultimate multilateral agreement is the trade bloc.
Impact on production and markets
In general these encourage production within the countries that have signed the agreement, because farmers have new customers for their produce. Examples include the 2007 decision by Sainsbury's, a UK supermarket, to purchase fair trade bananas from St Lucia. They were followed by Waitrose and the Co-op, two other large supermarkets. However, the two largest - Tesco and Asda - have still not followed by making all their bananas fair trade (as of March 2016). Therefore, the impact on production is somewhat limited.
This information is again covered in the Windward Islands case study from Core 2.
These can be between suppliers and producers regardless of government involvement. The ultimate multilateral agreement is the trade bloc.
Impact on production and markets
In general these encourage production within the countries that have signed the agreement, because farmers have new customers for their produce. Examples include the 2007 decision by Sainsbury's, a UK supermarket, to purchase fair trade bananas from St Lucia. They were followed by Waitrose and the Co-op, two other large supermarkets. However, the two largest - Tesco and Asda - have still not followed by making all their bananas fair trade (as of March 2016). Therefore, the impact on production is somewhat limited.
This information is again covered in the Windward Islands case study from Core 2.
TNCs
What
Transnational companies control large sections of the world's trade in food. The 'Big 10' (Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously Kraft Foods), Nestlé, PepsiCo and Unilever) are responsible for some incredible statistics, such as 4000 cups of Nescafe drunk every second around the world, and 1.7 billion Coca Cola products being used every day. (Source: Oxfam, 2013) |
Source: http://www.oxfam.org/sites/www.oxfam.org/files/bp166-behind-the-brands-260213-en.pdf
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Impact on production
TNCs are accused of demanding higher production from farmers, causing environmental degradation. Meanwhile, they encourage a move away from diversification towards monoculture. This means that instead of producing a diverse range of crops (which is generally good for the environment and especially the soil), farmers are encouraged to grow a single crop to maximise the amount they can sell to the TNC. This is because often the climate and physical geography of an area makes it excellent at growing certain products e.g. rice; this gives the area a comparative advantage over other producers.
Impact on markets
TNCs dominate the end market too. The campaign "behindthebrands.org" is an excellent source that shows just how much of a market is controlled by a major brand. The result is that TNCs have a huge role in selling the food and therefore also controlling how much is produced, and in what form it is sold.
TNCs are accused of demanding higher production from farmers, causing environmental degradation. Meanwhile, they encourage a move away from diversification towards monoculture. This means that instead of producing a diverse range of crops (which is generally good for the environment and especially the soil), farmers are encouraged to grow a single crop to maximise the amount they can sell to the TNC. This is because often the climate and physical geography of an area makes it excellent at growing certain products e.g. rice; this gives the area a comparative advantage over other producers.
Impact on markets
TNCs dominate the end market too. The campaign "behindthebrands.org" is an excellent source that shows just how much of a market is controlled by a major brand. The result is that TNCs have a huge role in selling the food and therefore also controlling how much is produced, and in what form it is sold.
In 2013 Oxfam released a report outlining the role of TNCs and their impact on food justice. The video below summarises the issues.
Another important aspect of TNC food control is that of land deals. In several countries, land that is commonly owned has been nationalised (i.e. taken for ownership by the government) and then privatised (sold to private companies). This means that TNCs have been able to do deals over huge areas of land and control the production in those areas.
Source: http://www.oxfam.org/sites/www.oxfam.org/files/bp166-behind-the-brands-260213-en.pdf
the state of world production today
Food production is at an all time high. The graph to the right shows the amount of cereal produced per year. The graph below shows the price of food for selected years. Read the graph carefully - it shows the variable price within a year, and the lines refer to different years. The graph below, however, shows that production remains at slow growth levels in Sub-Saharan Africa.
Source: http://www.wri.org/blog/2013/12/global-food-challenge-explained-18-graphics
The interactive graphic below shows the predicted future for food production in the coming years.
However, farmers are receiving low prices for their product, and poor people are still insecure in their food supply. Though it's not true that global hunger is increasing (see the Global Hunger Index for evidence that hunger is actually decreasing significantly, by 39% between 1990 and 2014) there are concerns over the long term future of food supplies. The video below describes what happens when too much production occurs, which is largely due to efficiency improvements.
The video below is an extract from Supersize Me. It describes the alternatives to TNC and market driven production.
The 2007-8 food crisis: the inevitable result of the system of food production and markets?
In 2008 and again in 2011, world food prices reached high levels and sparked riots and protests in many middle and low income countries. The graph below shows the nominal ('face value') and real ('actual price compared to income') cost of food. What made these spikes occur, and why are prices going down again in the face of increasing demand from a growing population?
Source: http://www.fao.org/worldfoodsituation/foodpricesindex/en/
M1 refers to Month 1 (January) and M7 is Month 7 (July).
Source: World Bank, DECPG. http://www.worldbank.org/en/topic/poverty/publication/food-price-watch-may-2014 Note: The Food Price Index weighs export prices of a variety of food commodities around the world in nominal U.S. dollar prices, 2010 = 100.
Source: World Bank, DECPG. http://www.worldbank.org/en/topic/poverty/publication/food-price-watch-may-2014 Note: The Food Price Index weighs export prices of a variety of food commodities around the world in nominal U.S. dollar prices, 2010 = 100.
food prices. The graph above shows the World Bank Global Food Price Index and how the huge increase occurred.
This period may have been caused by the temporary increase in the production of biofuels. However, there were also major concerns that this was a global problem created by insecure food networks, which themselves are the result of the issues discussed on this page. |
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