This presentation describes the impact of globalization on water and food security and implications for the poor

1. IFPRI
Theme 5
Globalization – What’s in it for
the Poor in Terms of Water and
Food Security?
EWRI, Anchorage
2005
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

2. GLOBALIZATION, WATER & FOOD
IFPRI
 Forces outside of the water
sector are changing water
management rapidly today
and into the future – they
include globalization, trade,
and climate change
Theme 5

3. OUTLINE
IFPRI
 Changes in Global Water & Food Demand
 Globalization - Food Security
 The Role of Trade
• Example of Indonesia
• Virtual Water
• MFA
• International Agreements and FDI
 Some Conclusions
Theme 5

4. IFPRI
CHANGE IN GLOBAL
WATER AND FOOD
DEMAND
Theme 5

5. CEREAL DEMAND 1995 and 2025
BASELINE
IFPRI
million metric tons 1995 2025
2,000 1,804
1,500
1,092
1,000 803
684
500
0
Developing countries Developed countries
Theme 5 Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing
with Scarcity

6. MEAT DEMAND 1995 and 2025
BASELINE
IFPRI
1995 2025
million metric tons
250 220.5
200
150 115.5
101.6 96.4
100
50
0
Developing countries Developed countries
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing
Theme 5 with Scarcity

7. AQUACULTURE % IN FISH PRODUCTION
1997 AND INCREASE 1997-2020
IFPRI
Aqua-
culture Capture
31% 32%
Aqua-
Capture
culture
69%
68%
Fish production 1997 Increase in fish production,
1997-2020
Theme 5

8. INCREASE IN WATER CONSUMPTION
BETWEEN 1995 AND 2025
IFPRI
Developing Countries World
120
100
percentage change
80
60
40
20
0
Household Industrial Livestock Irrigation
Source:
Theme 5 Rosegrant et al. 2002. World Water and Food to 2025: Dealing
with Scarcity

9. IRRIGATED CEREAL HARVESTED
AREA, 1995 AND 2025
IFPRI
US
4%
Rest
Deving China
33% 29%
Rest India
Deved 18%
16%
From 213 Mio in 1995 ha to 237 Mio ha by 2025
Theme 5 Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing
with Scarcity

10. SHARE OF IRRIGATION AND RAINFED IN
CEREAL PRODUCTION INCREASE, 1995-2025
IFPRI
Irrigated Rainfed
Developed countries Developed countries
11% 20%
Irrigated Rainfed
Developing countries Developing countries
39% 30%
Source: Rosegrant et al. 2002. World Water and Food to 2025:
Theme 5 Dealing with Scarcity

11. ANNUAL CEREAL YIELD GROWTH
RATES, 1982-92, 1992-2002, 2002-2025
IFPRI
1982-1992 1992-2002 2002-2025
percent growth rate per year
2.5
2.0
1.5
1.0
0.5
0.0
Developing Developed World
Countries Countries
Sources: FAOStat Agriculture 2004. Statistical database;
Rosegrant et al. 2002. World Water and Food to 2025:
Theme 5
Dealing with Scarcity

12. LOSS OF GRAIN PRODUCTION DUE TO WATER
SCARCITY, DEVELOPING COUNTRIES
IFPRI
2025 2025
1995 Business as 2025 Sustainable
Usual Water Crisis Water Use
0
-100
million mt
-200
-300
-400
-500
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing
Theme 5
with Scarcity

13. REGIONAL CEREAL NET TRADE,
1995 and 2025 BASELINE
IFPRI
million metric tons 1995 2025 S Asia India
(w/o
10 India) 4
WANA LAC China SSA SEA
0
-10 -6 -4
-10 -7
-20 -17
-20 -17 -19
-30 -21
-40 -35
-38
-50 -42
-60
-70
-80
-90 -83
Source: Rosegrant et al. 2002. World Water and Food to 2025:
Theme 5
Dealing with Scarcity

14. NUMBER OF MALNOURISHED CHILDREN
BY REGION, 1997 and 2025 BASELINE
IFPRI
million children 1997 2025
100
85
80
60
60
38
40 33
19 18
20 13
7 6 4 5 2
0
South Asia SSA South East China WANA Latin
Asia America
Source: Rosegrant et al. 2005. Looking Ahead: Long-Term
Theme 5
Prospects for Africa’s Food and Nutrition Security

15. GLOBALIZATION –
FOOD/WATER SECURITY

16. GLOBALIZATION, INCREASING
INTERNATIONAL FLOWS IN…
IFPRI
 Goods and services – water & food
 Capital
 Labor
 Information
 Technology
 Disease-causing agents
 Weapons, terrorism, war
 Insecurity
Theme 5

17. FOOD SECURITY & THE POOR
IFPRI
 Food security:
• National level - supply & trade
• HH level – access to food [requires (farm) income]
• Individual level – nutrition security, sufficient calories of
sufficient quality
 Caloric availability has gone up 30% since 60s
 No. malnourished children from 46% to 31% in
developing countries (from 1970 to 97)
 Food prices ½ or less compared to 60s/70s
[bad for producers, good for consumer, majority]
 Globalization played a major role [technology
transfer/information/trade] – picture less clear for
Theme 5 water security & the poor [ltd technology & inv]

18. FOOD SECURITY & THE POOR
IFPRI
 Countries with worsening indicators
 21 countries less calories and proteins
per capita than 1960s (26 less calories;
33 less proteins)
 Number and incidence of malnourished children
up in SSA by 17 million
 Number of hungry people still high, mostly in
SSA and South Asia
 World not on path to achieving international
targets to reduce hunger [MDG – given up on
total eradication]
Theme 5

19. THE ROLE OF TRADE
IFPRI + INDONESIA EXAMPLE
Theme 5

20. TRADE SITUATION
IFPRI
 World agriculture [crops/livestock] trade:
increase by a factor of 15 over 40 years [T&A:
30, Manufacturing: 55] from $32 billion in early
1960s to about $500 billion today
 In fisheries, global supply shifts from developed
to developing countries. Developing country
exports rose 8%/yr 1976–2002, half of all fish
exports now originate from these countries
(~$60 billion)
 Large FDI investments, f.ex. manufacturing
industries relying on water supplies [impact
water & food indirectly]; privatization of water
Theme 5 supplies

21. VALUE OF WORLD AGRICULTURAL
EXPORTS (crops & livestock)
IFPRI
1981-1990 1991-2000
500 476
400
310
US$ billion
300 273
200 166 161
112
100
0
primary processed total
 Developing country share in processed declined
Theme 5
from 27% to 25% in these two periods

22. TRADE LIBERALIZATION INCLUDES
IFPRI
 Reduction in trade barriers, including
tariffs and quotas
 Reduction in output price protection and
input subsidies
 Privatization of agricultural marketing
and trade
 Increased reliance on markets rather
than planning and the public sector
 … < 20% of food imported, but can help
 … but high subsidies in OECD countries
Theme 5

23. SUPPORT TO AGRICULTURE
IFPRI
EUR Billions
400
343 347
350
Others Others
300 275
250 Others Japan Japan
200
Japan
USA USA
150
USA
100
50 EU EU
EU
0
1986-1988 1999-2001 2001
Theme 5
Source: OECD (2002)

24. PRODUCER SUPPORT AS A SHARE OF
TOTAL FARM RECEIPTS
IFPRI
Switzerland 69
Norway 67
Korea 64
Japan 59
EU 35
OECD 35
USA 21
Czech Republic 17
Hungary 12
Slovak Republic 11
Poland 10
Australia 4
New Zealand 1
0 10 20 30 40 50 60 70 80
Theme 5
Source: OECD (2002) Percent

25. ALTERNATIVE TRADE SCENARIOS
IFPRI
 Trade Scenarios [DEDLIB, DINGLIB, FLIB]
model a removal vs. increase of wedges
(PSE and CSE) between domestic and
international prices for agricultural
commodities - Reductions are phased
between 2005 and 2006 – results 2020
 Net benefits to producers + net benefits to
consumers + tax savings due to removal of
subsidies under the Full Trade
Liberalization Scenario, compared to the
Baseline Scenario
Theme 5

26. PRICES INCREASE AS A RESULT OF
REMOVING TRADE DISTORTIONS
IFPRI
DEDLIB DINGLIB FLIB
35 32
31
30
percent change in 2020
25
20
20 18 19
16
15 13 14 13
11
9
10 7 6
4
5 2
0
Milk Sugarcane Rice Maize Beef
Theme 5

27. EXAMPLE INDONESIA – IMPACT ON
CEREAL PRODUCTION & DEMAND
IFPRI
2020 cereal prod/cap 2020 cereal dem/cap
300
259 258 265
246 245
250 222 222 232 240
215 215 211
200
kg/cap
150
100
50
0
BASE DEDLIB DINGLIB FLIB IIPR ILIB
Theme 5

28. EXAMPLE INDONESIA – IMPACT ON NET
CEREAL IMPORTS
IFPRI
0
IIPR DEDLIB BASE FLIB DINGLIB ILIB
-2000
-2184
-4000
thousand metric tons
-6000
-6033 -6359
-8000
-10000
-12000 -11182 -11501
-14000
-14274
-16000
Theme 5

29. EXAMPLE INDONESIA – IMPACT ON No.
MALNOURISHED CHILDREN
IFPRI
5,800
5,565
5,600
thousand children
5,400 5,213 5,172
5,200
4,967 4,927
5,000
4,756
4,800
4,600
4,400
4,200
IIPR DEDLIB BASE FLIB DINGLIB ILIB
Theme 5

30. INDONESIA – FULL LIBERALIZATION
IFPRI
Under FLIB, direction & magnitude of responds
depends on degree of protection of farmers /
taxation of consumers compared to other
countries, and on the respective supply/demand
elasticities
In the case of Indonesia, full worldwide trade
liberalization does lead to a relative decline in
local production and a relative increase in
domestic demand, which shows that without
liberalization, the country is protecting local
farmers while hurting domestic consumers
Theme 5

31. FULL LIBERALIZATION - BENEFITS
IFPRI
Annual Economic Benefits 2025
(billion US dollars)
West Asia/ North Africa 1.9
Latin America 3.7
Sub-Saharan Africa 3.3
East Asia 3.0
South Asia 2.0
Southeast Asia 0.4
Developing Countries 14.4
Developed Countries 10.0
World 24.4
(2000GDP China 1080 Billion US$, India 457 Billion US$, Ag Value
Theme 5
added China 172 Billion US$, India 103 Billion US$[WDI 2002)

32. FULL LIBERALIZATION - BENEFITS
IFPRI  Current trade distortions displace $40 billion of
developing country exports
 If trade distortions were removed, estimates
range from 40 [Anderson] -500 [Cline] million
people [out of about 2500 million] being lifted out
of poverty within 15 years or so
 Poverty would increase in some countries, but
decline in others [f.ex. Decline in poverty by
3.5% in Indonesia]
 Trade alone is not sufficient to lift them out of
poverty
Theme 5  Comparative advantage argument -

33. VIRTUAL WATER TRADE

34. TRADE IN VIRTUAL WATER
IFPRI
 Virtual water = the amount of water used in the
production of agricultural commodities—and in
other sectors
 Food importing countries indirectly purchase
water resources from exporting countries ,
thereby saving water they would have used
 Global water savings occur when exporters are
more water efficient than importers
 Global irrigation water savings occur when
exporters produce under rainfed conditions,
while importers would have used irrigation
otherwise
Theme 5

35. VIRTUAL WATER FLOWS (1995)
measured in crop ET, cereals
IFPRI
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
EU (15) excluding intra-trade Source: DeFraiture et al. 2002

36. VIRTUAL WATER FLOWS (2025)
measured in crop ET, cereals
IFPRI
Theme 5
Source: DeFraiture et al. 2002

37. TRADE IN VIRTUAL WATER
IFPRI
 In 1995, 7% of total crop evaporation and 5% of
irrigation water depletion was used to produce
cereal crops for export
 In 2025 this will rise to 8% and 5%, respectively
 Trade saves limited (irrigation) water: cereal
water use would only be 6% higher without
virtual water trade & ca. 20% of cereal trade
may be water related – thus water scarcity
currently plays a modest role in trade pattern -
expected to rise to 38% by 2025 for cereals
 Instead other factors, like subsidies, and trade
arrangements determine trade outcomes
Theme 5

38. TRADE IN VIRTUAL WATER
IFPRI
Estimated Cereal ET total:
- 2622 km3 (1995)
- 2758 km3 (2025)
Savings due to trade:
- 190 km3 (1995)
- 355 km3 (2025)
Savings due to water productivity (IE)
improvement over the period 1995-2025:
- 1215 km3
 Water productivity improvements are
more important than trade
Theme 5
Source: DeFraiture et al. 2002

39. MULTI-FIBER ARRANGEMENT

40. BACKGROUND ON MFA
IFPRI
 Established in 1974 to partially [~40%]
protect the textile and apparel industries of
developed countries from the low-cost
competition of T&A (textiles and apparel
[more]) from developing countries [originally
Japan] in the form of quantitative restrictions
 Trade shifted to Asian NICs  quota system,
production  to India/China, Nepal/
Bangladesh /Mauritius [no concentration]
 raised prices and depressed consumption
 depressed fiber crop production (implicit tax
Theme 5
of 20% vs. manmade fibers)

41. OTHER IMPORTANT FACTORS
IFPRI
• High tariffs: 10-20% for textiles; 20-40% for clothing
(2nd after agriculture)
• Other trade arrangements matter (NAFTA, EU-EE,
Caribbean, etc.)
• NTB (labeling, customs regulations..)
• High income elasticity (~0.9), growth in domestic
consumption developing countries
• Few restrictions on cotton, share in fiber production
continues to decline
• Post-9/11 security measures, f.ex. C-TPAT
(Customs-Trade Partnership Against Terrorism), 
integration: China, India, Pakistan & USA
Theme 5
• Labor, raw materials, supply reliability

42. SHIFTS IN TEXTILE AND APPAREL TRADE
(in US$ billion)
IFPRI
-80 -60 -40 -20 0 20 40 60 80
USA
EU
HK
Japan
O Sasia
Mexico
Thailand 1992
Bangladesh 1997
O SEAsia
2002
Pakistan
Indonesia
Turkey
S Korea
Taiwan
Theme 5 India
China

43. IMPORTS DEPEND ON ESTABLISHED
RELATIONS AND PROXIMITY (in US$ billion)
IFPRI
EU USA
LAC EE
2001-02
FSU
1992-93 FSU 2001-02
Developed 1992-93
Africa & ME
Asian NICs S Asia
SE Asia SE Asia
S Asia Developed
China Asian NICs
EE China
Africa & ME LAC
0 5 10 15 20 0 5 10 15 20
Theme 5

44. IMPACT OF PHASING OUT OF MFA
ON … WATER AND FOOD
IFPRI
T&A production Water availability
cotton Cotton production
Change in Location
- competition with other crops
yarn Industrial water use / pollution
CI
- competition with other uses
fabric
LI Industrial water use
clothing - competition with other uses
Theme 5

45. END OF MFA - ROLE OF CHINA
IFPRI
 Significant cotton producer (1) the YRB, incl.
Henan & Shandong (vs. soybean/corn); (2)
the Yangtze, incl. Jiangsu and Anhui (vs.
rice); and (3) the Northwest (Xinjiang) (vs.
corn);
 With MFA phase-out: Global value of T&A
2.5% higher in 25 years; China: textile +9%,
apparel +16%
 Global cotton production +3.5%, China +9%,
MENA +6%, US -1%
 Cotton price +2%,
Theme 5
Source: MacDonald, Somwaru, Meyer, and Diao 2001.

46. THUS, END OF MFA
IFPRI
 Greater concentration and vertical
integration – cotton  China, India &
Pakistan – small impacts on food/water;
 Largest impact through direct incomes in
T&A industries, thus indirectly on food and
water through lack of purchasing power
Theme 5

47. IFPRI CONCLUSIONS
Theme 5

48. CONCLUSIONS
IFPRI
 Forces outside of the water sector are
changing water management rapidly today
and into the future – they include
globalization, trade, and climate change
 High subsidies to agriculture (& subsidies to
water infrastructure) bring inefficiencies into
trade, food production, and water use, thus
lead to wastage, and contribute to water
scarcity, poverty, and food insecurity
 ‘Unproductive’ subsidies should be invested
in ‘productive’ investments, such as
Theme 5
infrastructure and technologies, R&D

49. CONCLUSIONS
IFPRI
 Water endowments currently have a
limited explanatory power for food and
other (indirect) water trade
 Overall, trade, if not distorted, and
globalization will help the poor increasing
food and water availabilities
 Need for complementary investment and
social policies for poverty alleviation and
food security
Theme 5

50. INVESTMENTS NEEDED IN
IFPRI
 Additional water investment in developing
countries, public supply / wastewater, &
irrigation [including large dams]
 Establish well-defined water rights, flexible
enough to allow trading
 Design water pricing mechanisms to pay
irrigators to use less water
 Eliminate power subsidies to groundwater
pumping
 Invest in crop breeding for drought, heat, and
saline tolerance
 Invest in research on water management,
Theme 5
including low tillage, rainwater harvesting