Challenge

1. Importance of trade to achieve food security
Trade is a central element for global food security. During the last two decades agricultural trade has nearly tripled surpassing USD 1.5 trillion. Furthermore, between 1995 and 2015 the share of globally consumed calories crossing an international border increased form 16.1 percent to 19.1 percent (Deason and Laborde, 2015). Much of this expansion in food trade and food consumption based on imports has come from developing countries. In addition, a large proportion of net exports are provided by a small number of net exporting emerging economies.

2. The international market for agricultural products
In spite of this important role played by food trade in attaining food security, there are many substantial barriers to trade. Regardless of some improvements that were achieved in the two decades prior to the global financial crisis, very significant tariff barriers remain and are higher in agricultural products than any other product group, affecting price stability at the global level, increasing the cost of food in the countries applying those restrictions, and leading to a misallocation of resources that reduces world welfare (Figure 1).

In addition, non-tariff measures (NTMs) have recently greatly increased in numbers, especially for food products (Figure 2). These include sanitary and phytosanitary measures, various technical barriers to trade and many other NTMS. While some of these NTMs in food trade were traditionally used by the developed countries for food safety consideration, they have increasingly been used, since the early 2000, by major net food importing countries as trade barriers

These tariffs and non-tariff measures are a source of concern for food exporting countries that face increasingly uncertain and volatile international markets a situation that weakens the incentives to place agricultural production as a priority and a major source of economic growth and development. A direct consequence of this, has been lower levels of direct agricultural investments on infrastructure and innovations, which could result in lower and more unstable levels of production and exports. This trade environment, the application by many mayor importing countries of tariff escalation policies, and domestic macroeconomic difficulties have also contributed to some exporting countries implementing export restrictions policies which are highly damaging to the stability of food supply and prices (Figure 3).

The possibility of unstable markets and the potential unreliable behavior of exporters in general, and of large net exporters in particular, is a significant menace for importing countries. At least four main concerns feed into the potential sense of insecurity by net importing countries:

1. Unstable and volatile markets as a consequence of climate change and unpredictable behavior of key players. Two examples of this are: a) export restriction imposed by major net exporters; and b) unpredictable variations in public stockholdings.

2. Discretionary use of domestic support and its lack of transparency, which causes distortions on production, land use and trade.

3. High dependence on supplies from a few large net exporters.

4. The always-present possibility of trade embargoes by some of these important suppliers.

Given these uncertain conditions in international agricultural markets, large food net importing countries could pursue global investment strategies to gain more control of world food systems, or implement policies that could further destabilize the international market. In a world where multilateral trade agreements and adherence to trade rules seem to be weakening, the impact of key net importing and exporting countries will increase. It is crucial to advance mechanisms by which the production and market behavior of these big players can be stabilized and made more predictable, so that net importing countries feel more secure in their reliance on imported food and net exporters can have confidence in their access to international markets.

3. The Main Players
A number of emerging economies and newly developed countries are now main actors in world trade. Some like China, Korea and Saudi Arabia have become large net importers as a consequence of the rapid increase of consumption resulting from economic growth and a growing middle class. Others like Brazil, Argentina and Thailand have modernized their agricultures, increased exponentially their production and have thus become main net exporters. The end result of these processes is that five countries (China, Korea, Japan, Russia and Saudi Arabia) are responsible for about 40% of food net imports and seven countries (Argentina, Australia, Brazil, Canada, New Zealand, Thailand and USA) account for about 55% of food net exports (Figure 4) The impact of these countries that are main players on the international markets is very large and their dominance is expected to increase.

Consequently, the production and consumption behavior of this small number of countries has great influence on international food prices and market stability. Any one of them could have substantial influence on the stability of the market and the price level of all major food commodities. This influence is compounded by a few other countries, like India, which is already a large food trader and could become even larger in the near future although it is uncertain if as a large net exporter or a large net importer. Given this
situation it would seem that the development of special agreements between these large players would result in a more stable and balanced trade environment, which will benefit not only to these large players but also all other countries, especially less developing countries.