How trade with the UK affects food and nutrition security in developing countries

Food and agricultural trade can be highly beneficial for economic development: it enables and incentivizes technological advancement, driving economic growth which can directly (through employment) or indirectly (through increased public revenue) lift people out of poverty and increase their ability to buy food. Trade facilitates investment in agriculture which makes it more commercially viable, but unless environmental stewardship measures are actively incentivized or mandated, can lead to environmental degradation, which can leave producers more exposed to climatic shocks.

However, generally among research participants, there was also strong agreement that changes are necessary, not least because of the changing and more volatile environmental and geopolitical contexts in which it is increasingly operating. The opening up of international markets could incentivize government investment; this could be supported by finance and official development assistance (ODA) to encourage climate-resilient forms of public investment and the development of environmental policies and strategies.

Summary conclusions from the research include:

• Food and agricultural trade is beneficial but has downsides.
• Economic benefits do not necessarily lead to improved food and nutrition security.
• The impact of shocks suggests a need to focus on resilience.
• Trade relationships should focus on system-positive outcomes developed in partnership.

The COVID-19 pandemic has highlighted the pervasive challenge of food and nutrition insecurity in developing countries and introduced new threats in these settings. Concerns which arose in the first quarter of 2020 about potentially significant disruptions to global food trade have largely been replaced by fears of long-term impacts of a global recession brought on by lockdowns in many countries. The degree to which movement restrictions and border controls are affecting actors along food supply chains remains underexplored, and anecdotal evidence indicates there are serious perturbations to food markets at local and regional levels, with the potential for spillover effects to international trade.

While the pandemic has had some minor impacts on international supply, engagements with stakeholders and secondary research showed that the overall impacts on food and nutrition security in low- and middle-income countries was due less to people’s inability to access sufficient calories and more likely a deterioration in the quality of their diet.

For the UK, the exit from the European Union (EU) has created significant opportunities to do things differently in the food, agriculture, and trade spaces. These opportunities include:

• the introduction of new primary legislation on food, agriculture, and trade
• the development of new trade partnerships, including the announcement of the emerging markets trade scheme¹
• the commissioning and development of a new National Food Strategy for England²
  the amalgamation of the UK Department for International Development and Foreign and Commonwealth Office into the Foreign, Commonwealth and Development Office
• the temporary reduction in the official development budget announced in the November 2020 Spending Review,³ which will last indefinitely until public finances are able to pass a series of post-COVID-19 fiscal tests.⁴

The combination of the pandemic and Brexit mean the relationships between trade, aid, and development already face new opportunities and risks and are under increased scrutiny. This presents an important opportunity to ensure changes to trade are beneficial to all stakeholders both in the UK and overseas.

In this context, key stakeholders in UK agri-food trade with low- and middle-income countries were asked for their insights about the risks and benefits associated with contemporary trade dynamics and how these may evolve under a series of future scenarios. These insights are explored and summarized here.

Changes in trade affect socio-economic situations in exporting countries through multiple mechanisms. Figure 1 illustrates some of the more significant ways in which UK demand for food from low- and middle-income countries can affect food and nutrition security in those countries. The figure also illustrates some high-level links between imports and food and nutrition security in the UK – but the emphasis is on the developing country dynamics.

This web of relationships is necessarily generalized as the impacts vary according to the specifics of each trading relationship and the socio-economic, political and environmental context in which the trade occurs. These impacts are not specific to trade with the UK but apply to food exports to any of the world's largest economies, but this schema does illustrate how trading arrangements can have unequal and unforeseen outcomes – including on people not directly involved in export supply chains – and can help inform decisions on how trade can be optimized for both exporting and importing countries.

In Figure 1, four examples of the myriad pathways that impacts of international trade in food and agricultural commodities can take under different circumstances are illustrated:

Pathway 1: Increased demand from export markets may increase the scale and intensity of production, driving consolidation, crowding out smallholders and promoting an increased focus on commodity crops at the expense of food crops for local markets. While the spread of technology through trade-enabled economic growth has alleviated poverty for many millions of people, it also creates potential negative environmental, nutritional, and equity outcomes.

Pathway 2: Increased demand for exports may create employment opportunities throughout agri-food value chains. This is potentially beneficial for households who were previously reliant on less secure sources of income, increasing their ability to spend more on food, which may in turn bolster the local rural economy, with knock-on benefits for broader nutrition security. Depending on their preferences and the influence of the food environment, increased income may lead to people eating less nutritious food. It may also trigger structural and inflationary changes in local markets, so people who cannot get employment in the high-value chain may no longer be able to buy from these markets and become increasingly dependent on their own production.

Pathway 3: Export-driven increases in production intensity may degrade the local environment, making it more vulnerable to localized environmental risks and thereby reducing local resilience. Export-orientated production is also more exposed to systemic risks in global markets. While global markets are conventionally assumed to buffer local supply shocks, this only occurs when the markets function well.

As the 2007-08 and 2010-11 food price crises illustrated, international markets – when faced with unprecedented conditions – can amplify the effects of initial shocks. As environment-related shocks become more frequent and more severe, a greater reliance on trade may expose producer countries to new price volatility. In the event of either idiosyncratic or systemic shocks, food security may become more dependent on interventionist and redistributive measures undertaken by the state, such as social protection measures, which may need to be supported or enabled by overseas development assistance.

Pathway 4: The early weeks of the pandemic saw rapid disequilibrium as UK retailers scrambled to meet surging demand, driving food prices to rise in exporting countries with negative impacts on worker safety.

There is a well-established evidence base that, for exporting countries with comparative advantage, the principal macroeconomic benefits stem from rising incomes of exporters and faster economic growth.⁵ Rising incomes may improve people’s nutrition but also contribute to people switching to more highly-processed, calorie-dense but micronutrient-deficient diets. At the micro-level, the distribution of beneficial and detrimental outcomes – including indirect impacts such as those stemming from environmental degradation associated with export production⁶ – are much more varied, context-specific, and subject to other policies and practices as well as trade-specific factors.⁷

Experts taking part in this research initiative took varied positions on how trade and local food and nutrition security interact. Those working on traded commodities, non-perishable goods, and perishables such as shrimps or tropical fruit mainly only saw positives as exports lead to economic growth in exporting countries and benefits trickle down to household income. They generally saw little connection between export volumes and local food and nutrition security.

Other experts, including those who work with small-scale producers and landless labourers, saw broader impacts, such as on land rights and access to land, and said that directing resources to the export market rather than the local market undermines the resilience of local food systems.

Trade is highly beneficial for economic development because it enables and incentivizes technological advancement, driving economic growth which can directly (through employment) or indirectly (through increased public revenue) lift people out of poverty.⁸ The evidence on the nutritional benefits of increased trade is far less clear cut. As food choices are largely shaped by people’s food environments, increased purchasing power alone is rarely sufficient to improve nutrition.

There is some evidence suggesting trade openness and economic growth have positive and significant impacts on dietary energy consumption and contribute to increased dietary diversity;⁹ there is also emerging evidence that agricultural trade openness decreases obesity in the long run,¹⁰ but these studies tend to focus more on the impacts of food imports on food availability rather than the economic impacts of exports on food access. There is a paucity of empirical data on individual-level impacts from specific supply chains as opposed to generalized population-level effects.

Under normal market conditions, in the event of localized production shocks such as those induced by climatic hazards, trade can buffer local supply shortfalls, as it enables the movement of goods from areas of high productivity to those of low productivity.

But trade brings risks as well as benefits. For example, trade may incentivize the production of lower added value staple crops at large scale. This can drive the adoption of monocultural production, which has a range of positive (such as employment) and negative (such as environmental) outcomes. Under some circumstances it creates a lack of resilience if the bulk of agricultural production is focused on fulfilling export demand rather than meeting the local population food needs.

Risks include incentives to externalise the environmental costs of production (such as biodiversity loss, carbon emissions, pollution) in pursuit of increasing volumes,¹¹ potentially enhancing exporter countries’ exposure to pollution or other environmental risks. There is also the potential for systemic risks arising through the global market because, as more countries and sectors become embedded in a globalized world, systemic fragility increases.¹²

Economies are increasingly geared around trade, which may be beneficial in times of stability, but can create a lack of resilience in times of systemic crisis if local needs can only be met through trade, which is at risk from disruption.¹³ Risks arising in one place can be transmitted across sectors and borders, interrupting the flow of goods, finance, information, and people to create systemic risks.¹⁴

A proactive approach to risk management is required to balance the comparative advantages and risk-mitigating benefits of trade with the increased exposure to systemic risks that it presents. Over-reliance on either self-sufficiency or import dependence may erode resilience.

Given that the trade environment is changing, especially for the UK’s partners following Brexit, and that the potential for shocks to the system are increasing, there is a need to ensure the positives of trade are maximized, and the risks minimized. The risks of trade incentivizing a reduction of resilience in some regards require careful consideration alongside the potential benefits.

Changing trade relationships will have different outcomes according to the context (country, commodity, circumstances). To further the understanding of how, and under what circumstances, trading relationships may support resilient food and nutrition security outcomes, four scenarios were explored:

1. How COVID-19 has affected food and nutrition security and supply chains
2. Future demand-side shocks
3. Future supply-side shocks
4. Potential consequences from changing trade relationships

Food poverty, insecurity and inequality have risen since the beginning of the pandemic even though have been no shortage of basic food supplies on global markets. International supply chains worked better than expected and global systems continued functioning. This was not always true for local supply chains, especially in poorer areas, both urban and rural.

Although COVID-19 and the measures to contain it largely constituted a demand-side shock – a sudden change in the demand for goods – it also created supply-side issues such as impacts on agricultural inputs, including labour, and cross-border checks delaying the supply of time-sensitive goods.

Among the UK’s more significant import relationship with low- and middle-income countries, Kenyan vegetable supplies were acutely affected by airfreight interruptions, and cocoa from Côte d'Ivoire and Bangladeshi seafood were affected somewhat by hospitality closures, but there was no evidence of significant sustained impacts to supply chains at the time of analysis.

In early 2020, prior to the pandemic, Kenya was already suffering its worst locust invasion for 70 years.¹⁵ The COVID-19-related grounding of international passenger flights resulted in significant cargo supply shortfalls (owing to high dependence on belly-hold freight) and the collapse of all cut flower export markets. Cargo prices increased dramatically, pricing out small-scale producers, reducing their access to markets and incomes.

In Bangladesh, up to 70 per cent of 300,000 shrimp farmers in Khulna, Satkhira and Bagerhat districts who had to end their trade due to hospitality closures due to the COVID-19 lockdowns. With 80 per cent of export orders cancelled between July and December 2020, local shrimp prices more than halved, reducing producers’ incomes.¹⁶

Risks to nutrition security from the pandemic have generally been greater than the risks of absolute food shortages because, in many low- and middle-income countries, lockdowns, loss of employment, and loss of market access have proved major concerns for small-scale producers and daily wage earners. For people who spend much of their earnings on food, lost earnings mean challenges in affording sufficient food.

A principal lesson learned from the pandemic has been that supply chains optimized for efficiency cannot be easily reconfigured in response to demand reductions leading to significant waste, particularly of fresh produce, and income losses. Demand crashes – such as for Kenyan fresh flowers and some fruits and vegetables – have led to significant numbers of labourers being laid off, reducing their household income. A potential countervailing factor in some contexts has been the increased availability and affordability of excess vegetables on local markets following the collapse in international demand.¹⁷

In some cases, European retailers used the circumstances reduce the prices they paid to producers in a way that might be seen as exploitative.¹⁸ Production for export was classed as a protected industry in many low- and middle-income countries, so it was supported in many ways (such as labour being exempt from lockdown restrictions and export produce going through ‘green lanes’ at border crossings to avoid lengthy checks), and workers’ incomes were maintained, albeit at the expense of greater exposure to COVID-19. Non-export sectors were often more exposed to food security risks: as sectors shut down, household income was reduced, and sometimes less food reached local markets due to labour or transport bottlenecks.¹⁹

While the impact of any given shock on food and nutrition security is context-specific, they often depend on the degree to which people usually get food from their own land and local production and/or have access to established or diverse supply chains. These dynamics may differ within and between different rural and urban areas.

In urban areas, food insecurity increased considerably in many countries. Research participants suggested in urban poor communities where people have little or no savings and no access to social safety nets, the closure of workplaces and schools had substantial impacts, not only on incomes but also because work canteens and school feeding programmes shut. In many cases, government support mechanisms either did not exist or were ill-equipped to cope with the increased demand for food and income assistance. The short-term impacts were accompanied by uncertainties about food and income sources in the longer term.

While COVID-19-related shocks have generally originated from demand constraints rather than lack of on-farm supplies, they have affected all stages of food supply chains. However, not all sectors and products have been equally affected, with different products experiencing disruptions at different stages of the chain.²⁰

The rapid response of food supply chains highlights the importance of an open and supportive trading environment. The ability to tap into new sources of supply when access to existing sources are compromised has both negative and positive effects for the UK’s trading partners in low- and middle-income countries.

Whilst there are many important lessons to be learned from COVID-19, to what extent are these also applicable to other demand-side changes?

COVID-19 was very much a sudden-onset shock. For some countries, lessons learned from SARS, MERS or Ebola outbreaks informed country-level responses to COVID-19, particularly in terms of the speed of introducing lockdowns, surveillance (track and trace) and border controls.²¹ Ebola, as a disease, differs from SARS or COVID-19 because of its higher mortality in people of working age, and therefore has had a greater impact on food supply than COVID-19 in recent outbreaks. Hence, demand disruptions from different diseases may have different impacts on both demand and supply. As a generalisation, the availability of labour has not generally been affected through COVID-19, and so although agriculture and food supply chains have largely continued to function, this will not be the case with all diseases.

Beyond human diseases, rapid changes in demand can stem from many causes. For example, the US-China trade wars rapidly altered prices and led to cascading impacts on the areas of production most affected. Notably, US agricultural exports to China – mainly soy – fell from $15.8 billion in 2017 to $5.9 billion in 2018, and led to significant impacts on farm economies, requiring public support.²² This rapid reduction in demand for soy from the US for the Chinese market, incentivised increasing demand from alternative suppliers, notably Brazil, further putting pressure on forest resources.²³ More generalised malaise in economic activities can also have slower-onset impacts, with economic depressions and recessions both generally being associated with qualitative and quantitative declines in consumption demand. As these are typically slower onset events however, there is generally more time, though not necessarily fiscal, opportunity to manage adverse consequences.

Obviously, fast-onset shocks have significant potential to perturb the system in different ways from slower onset changes, as systems have no time to adapt. The ways that responses to emerging diseases propagate may very much affect whether a demand shock, such as those caused by lockdowns, also translates into a supply-shock. However, the lessons from SARS, MERS, COVID-19 and Ebola are that surveillance and rapid response (lockdown, test-and-trace, border control) are most effective at disease control, but equally most likely to lead to greater disruptions to the food system.

Building resilience to future shocks on the demand side may necessitate significant structural changes, such as greater storage capacity, particularly for fresh produce; decentralization, modularization, and diversification of supply chains; greater flexibility in reconfiguring supply chains; as well as better resources and more responsive social protection measures for producers and marginalized consumers.

A shock on the supply side can have different impacts depending on whether it is caused by a local issue affecting production in one area (such as a local drought) or by a hazard occurring elsewhere, with effects transmitted through the global food system.²⁴

Local shocks such as extreme heat, drought, outbreaks, pests, or diseases can devastate production at a local, country or regional level, with severe impacts on both local food security and production for export. These impacts can affect UK consumers, such as when weather-related supply shortfalls in 2017 affected UK avocado prices.²⁵ However these impacts are usually relatively limited as the UK can respond to poor conditions in one producer country by sourcing food imports from elsewhere.

The food price spikes of 2007–08 and 2010–11 are examples of global issues transmitted through trade. Perceived shortfalls in global supply, caused most notably by droughts in Australia and Eastern Europe respectively, coupled with low food stocks, biofuel subsidies in the US and the EU which have led land to be converted from crops for food to biofuel production, and low transparency, led to runs on the market which drove up food prices internationally, sparked cascades of policy decisions – such as export bans – which exacerbated the price rises, and the impacts spilled over from wheat, the commodity initially affected, to others such as rice.²⁶

These changes in turn spilled over to local market prices in low- and middle-income countries, and also affected food aid as purchasing power was constrained. In 2007–08 staple food prices in sub-Saharan Africa rose 63 per cent²⁷ and, in such cases, trade can undermine local food security by exposing it to risks from overseas.

Local food shocks can affect production both for trade and local food security depending on the circumstances. Production for trade is often better capitalized on than domestic-oriented smallholder agriculture, so is potentially better insulated from some local perturbations, but it can also exacerbate them, if, for example, production for export is prioritized for irrigation, reducing availability of water for other farmers.

A severe shock can lead to reduction in production for trade, loss of work for agricultural workers, and can exacerbate food insecurity. A sufficiently severe shock such as a drought co-occurring with other impacts could potentially affect both local supply and international trade if a food price spike then occurred.

There is a high probability future supply shocks driven or exacerbated by climate change are highly differentiated in retail and high-value supply chains, where there are more direct relationships and more vertical integration, compared with wholesale/hospitality and commodity supply chains.

In the former case, there is the potential for less risk as supply-chain links and governance mechanisms are typically stronger. Conversely, however, continuity of supply requirements means retailers may be forced to drop existing relationships and source from elsewhere when supply is interrupted due to climatic shocks. Depending on the nature of the contracts and duty of responsibility subsequently developed with substitute suppliers, there may be no guarantee that sourcing arrangements return to the previous situation when the disruption ends.

Depending on the produce affected by supply shocks, the value of UK demand may outcompete intra-regional trade or domestic demand, pushing up local prices and – in the absence of proactive policy interventions – affecting food supply for regional trading partners and domestic consumers. This may be less of a concern if there is no local or regional demand for the produce but it does highlight potential negative consequences of restructuring low- and middle-income countries’ agri-food sectors towards a greater focus on high-value exports.

In many circumstances, export supply chains may be more resilient to shocks than supply for local markets, owing to greater levels of investment. ODA and trade-related support, such as blended finance mechanisms, could usefully support core export-market developments to ensure investments and benefits are broad-based, support landscape-wide resilience in the exporting region, and do not exacerbate existing inequalities within the rural economy.

Trade-facilitated investment in agriculture makes it more commercially viable but, unless environmental stewardship measures are actively incentivized or mandated, it could drive environmental degradation which could leave producers more exposed to climatic shocks. The opening up of international markets is likely to incentivize government investment, while international finance and ODA could encourage resilient and climate-proof public investment and support the development of environmental and climate-related policies and strategies as a condition for access to export markets.

The strengthening of a trade relationship creates new demand pressures on production if new or expanded production opportunities provide new opportunities for workers to increase household income. But extra demand also drives pressure for land conversion from supplying local markets to producing export commodities with many knock-on environmental consequences, from biodiversity loss to increased silting of hydro-powered electricity generation. It can affect local land tenure arrangements and reduce the viability of smallholder farming.

Displacement of land from small-scale subsistence farming to commodity-crop-driven production can reduce the availability of food in local markets, which may reduce food and nutrition security resilience in the case of a food price shock. Furthermore, a trade-dependent economy which boosts household incomes and increases the availability of hyper-processed foods in local shops may increase the incidence of malnutrition by driving up calorie consumption without improving the intake of other nutrients.²⁸

The role of subsidies in facilitating trade is important. Engagement with stakeholders suggest the current system in many countries²⁹ unfairly benefits larger farmers, seed companies, and research and development investments in commodity agricultural production. This creates incentives for farmers to increase the amount of food produced per unit area for wealth generation without considering how many people are nourished by that land.³⁰ Interviewees suggested subsidies could be more equitably distributed, prioritizing smallholder farmers and those producing nutritious foods. Recent modelling work shows a shift in subsidies on a global basis can increase the availability of healthy and sustainable food while also making it cheaper.³¹

The ways in which changing trade relationships may affect food and nutrition security extend beyond the development of bilateral or plurilateral relationships. New international trade relationships can be used to displace imports from other trading partners, affect prices in other countries sourcing from the same producers and, as the major economies raise their climate ambition and move to green trade, including border carbon adjustments, this may affect low- and middle-income countries which may leave them excluded from these markets.

The UK’s current approach to trade relationships is to move away from requiring particular standards³² and towards working to create economically important partnerships that deliver trade with additional key attributes such as sustainability. The proposals around working with exporting countries to develop forest-free supply chains was developed from the work of the Global Resource Initiative, a taskforce of leaders from business and environmental organizations which advised the UK government on how to green its international supply chains.³³

Both the participatory workshop and interviewees consulted for this research suggest there is a need to work in partnership with exporting countries to maximize benefits and minimize negatives of international trade. Interviewees suggested any new trading relationship the UK develops with Asian and African countries should be built around a discussion about how the UK can help make these countries’ food systems and export sectors more robust and resilient. They also said environmental and climate change considerations should be essential in any trade deal as should ensuring farmers are fairly compensated for the value of the food they produce, and should have access to financing and climate insurance. New trade relationships must be good for local producers as well as for the UK.

Participants in this research consider trade generally has a positive impact on the economic development of low- and middle-income countries, but there is also strong agreement changes are necessary, not least because of the changing and more volatile environmental and geopolitical contexts in which trade is increasingly operating. Although shocks such as COVID-19 tend to garner greater attention due to their acute nature, the insidious impacts of long-term environmental change are no less significant.

Based on our findings, as the UK considers its post-pandemic, post-Brexit food trade relationships there is little room for complacency. It will be critical to avoid entrenching a system which is not resilient to the long-term threats from climate change, biodiversity loss and ecosystem degradation.

Equity considerations must be at the forefront of responsible trade support and facilitation arrangements with low- and middle-income countries. Only through setting better environmental and welfare standards, increasing crop diversity and ensuring trade does not compromise intergenerational equity can trade truly support resilience and mitigate against negative social and environmental impacts. With a level playing field and supportive, non-exploitative partnerships, trade can be an enabler of best practices around sustainable and resilient supply chains.

• The impacts of the COVID-19 pandemic on low- and middle-income countries to UK food supply chains have been relatively muted. Although some suppliers have faced challenges in responding to reconfigured demand patterns, the supply and availability of produce from low- and middle-income countries to the UK has not been significantly affected. This reflects a more general, global observation that food systems have fared better during the pandemic than initially expected. The pandemic typically had a greater impact on people’s ability to afford food than on the absolute availability of food, but it would be misguided to conclude that current food systems are necessarily resilient.
• Trade is beneficial but also has downsides. Trade was generally considered by our experts to have a positive impact on the economic development of low- and middle-income countries, but there are some people excluded from the benefits or negatively affected by spillover effects. Minimizing the risks requires sensitive investment with an eye on landscape-wide and long-term impacts of supply chains, not just immediate and direct effects.
• Economic benefits do not necessarily lead to improved food and nutrition security. Even if there are broad-based economic benefits from trade relationships, economic development and poverty reduction do not guarantee improvements to food and nutrition security if access to unhealthy food environments increases. Trade investment needs to be supported by public, private, and donor efforts to improve the broader nutritional environment and support healthy dietary choices.
• The impact of shocks suggests a need to focus on resilience. Rapid disruptions to equilibrium conditions can cause significant impacts which may create temporary or long-lasting impacts. Trade investment needs to be structured and supported in a manner which promotes resilience among export partners, not just resilience of supply of imports.
• Trade relationships should focus on system-positive outcomes developed in partnership. The ‘build back better’ agenda emerged as a consistent part of economic, environmental, and developmental discourse during 2020, and refers to taking opportunities which arise in times of change and reconfiguring the system towards tackling longer-term threat multipliers such as climate change and environmental degradation.³⁴
• Increasing numbers of people will be affected and marginalized if opportunities are missed. As environmental impacts mount, from supply-side issues such as droughts to demand-side issues such as new diseases, in the decades ahead³⁵ there is an risk of inter-generational inequality if there is a narrow focus on economic growth now enabled through trade, instead of a focus on equitable, sustainable trade to reduce problems in the future.
• Better environmental and welfare standards and ensuring intergenerational equality need greater prominence. Good practices regarding increasing resilience, mitigating environmental impacts, and increasing diversity of crops should be considerations in developing trade-relationships with low- and middle-income countries. Trade is a good medium to develop level playing fields, non-exploitative partnerships, and through which to transfer and mainstream best practices around sustainable and resilient supply chains.³⁶

This article summarizes some of the insights from a project commissioned by the Food Foundation and funded by the UK Foreign, Commonwealth and Development Office.