Impact of global trade policies on the agrifood sector

Global trade policies transformed the agrifood industry's operations

Since the latter half of the twentieth century, globalization has increasingly integrated low- and middle-income countries into global markets, enhancing trade connections among members of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). This integration has led to a more interconnected global trade network, particularly in food and agriculture. Despite this, the international trade network has become more decentralized, with regional trade clusters growing in prominence alongside global trade frameworks.

The evolution of global agricultural trade

The GATT, established in 1947, sought to promote trade by reducing barriers and establishing a transparent international trading system. Initially, it had significant loopholes that allowed agricultural subsidies and import quotas, distorting global agricultural markets and disadvantaging low-cost producers from developing countries. However, the Uruguay Round and the establishment of the WTO in 1995, with the WTO Agreement on Agriculture (AoA), explicitly incorporated agricultural trade into global trade liberalization efforts.

The WTO has introduced important principles like non-discrimination and transparency, contributing to less distorted global markets and reduced trade uncertainty. While the impact of GATT/WTO membership on agricultural trade has shown mixed results, evidence suggests that the WTO framework has helped expand trade by providing more predictable and fair conditions. It also promotes fair competition and supports less developed countries with flexible provisions and practical assistance to reduce trade costs.

EU against Unfair Trade Practices

The EU Directive 2019/633 on unfair trading practices (UTPs) in the agricultural and food supply chain aims to protect farmers and small to medium-sized suppliers from power imbalances in b2b relationships. Adopted on 17 April 2019, the Directive bans 16 unfair trading practices, categorized into 'black' practices, prohibited outright, and 'grey' practices, which are allowed only if agreed upon clearly and unambiguously. These regulations seek to ensure timely payments, prevent unilateral contract changes, and prohibit the misuse of trade secrets, among other protections. The goal is to establish a fairer food supply chain by improving the bargaining power of smaller suppliers and ensuring they are not subjected to exploitative practices by larger operators.

The Directive mandates that all EU countries transpose these rules into national law by 1 May 2021, with enforcement beginning six months later. Each member state must appoint a competent authority to enforce the regulations, capable of conducting investigations and imposing fines. While the Directive sets a minimum standard, countries can adopt stricter measures. The European Commission has monitored the implementation, publishing interim and updated reports on transposition and enforcement across the EU. This initiative is part of a broader effort, including the Farm to Fork Strategy, to create a more equitable and transparent food supply chain.

The need for resilience in global trade amidst global disruptions

Recent global events, such as the COVID-19 pandemic, the war in Ukraine, and climate change, have exposed vulnerabilities in the international food and agricultural trade system. These disruptions underscore the need for a resilient and well-integrated global agrifood system, particularly for low-income countries. The FAO's 2022 State of Agricultural Commodity Markets report highlights the importance of trade policies that safeguard global food security, balance economic and environmental objectives, and enhance resilience to challenges like conflicts, pandemics, and extreme weather events.

Balancing food security and sustainability

Trade is crucial for ensuring food security and public health through nutrition by enabling the distribution of food products to areas with insufficient domestic production. It also facilitates the spread of technology and knowledge, boosting productivity and economic growth. However, disparities in productivity and natural resource endowments necessitate leveraging comparative advantages while managing environmental impacts. Trade can enhance resource efficiency and support climate change adaptation and mitigation efforts. Multilateral and regional trade agreements, incorporating environmental clauses, are essential for balancing economic and environmental trade-offs, ensuring that trade contributes positively to sustainable development goals.

Companies may follow the rules, but they can do more

Global trade practices are already in effect, but companies must do more to promote sustainable and fair trade. Beyond adhering to existing regulations imposed by various bodies, all stakeholders should stay informed about new rules and methods that ensure transparency and fairness. Wikifarmer is dedicated to promoting democratic practices within the global food supply system. As an online B2B platform in the agri-food sector, we aim to eliminate unfair pricing and educate producers about fair market values. Wikifarmer Marketplace facilitates access to global markets through transparent and integrated transactions, ensuring fairness and clarity in trade.