South America’s Contribution
to World Food Markets:
GTAP Projections to 2030
Kym Anderson
University of Adelaide and Australian National University
and Anna Strutt
Waikato University, NZ, and University of Adelaide
IAAE/IAAE Pre-Congress Symposium on Globalization, M acroeconom ic
I m balances, and South Am erica as the W orld’s Food Basket
Foz do Iguaçu, Brazil, 18 August 2012
Key questions
If rapid economic growth continues in
natural resource-poor Asian countries,
what are the consequences by 2030 for:
global food markets?
other primary product markets?
natural resource-rich Latin America’s trade?
How would that 2030 projection alter with:
Altered global primary sector TFP growth?
Faster agric TFP growth in China and India?
Next week: slower growth in China (& India)?
Why is this important for LAC (and ROW)?
Emerging Asia’s recent and prospective
growth is not so much qualitatively
different from the earlier growth of East
Asia’s NIEs, as quantitatively different
Even with Japan, that earlier expansion
involved just 3% of world’s pop’n, whereas
China and India account for almost 40%
• And Ch+In are nearly as densely populated as
China’s East Asian neighbors
Hence Ch/In’s declining comparative
advantages in primary prod’n matter far more
for global food, water, & energy security
• not to mention GHG emissions and climate change
Methodology
We use a reasonably standard version of the
comparative static GTAP model to project the
world economy to 2030
Aggregated to 35 regions and 26 sectors
Targets exogenous expansions in GDP along with
populations and factor endowments
Hence TFP growth rates are endogenously
determined by the model’s adding-up conditions
• which we specify to differ somewhat by sector in the
various regions
Core 2030 baseline
Core sim calibrated to project only a slight rise in
int’l prices of primary products and services
relative to prices of non-food manufactures
Using a combination of growth in factor endowments
(including agricultural land & mineral resources) and
sectoral differences in TFP growth rates
Productivity growth differentials:
• Primary product (except fuels): 1% p.a. higher than manuf,
consistent with history (see Martin & Mitra, EDCC, 2001)
• Services: 0.5% p.a. lower than manuf, consistent with history
=> int’l prices of farm products rel. to manufactured goods rise
(but only slightly), c.f. gradual decline in 20th century
What will primary product prices do?
Last year IEA and others said energy
prices will remain high and volatile
But in May 2012 it reported on great
prospects for unconventional gas prod’n
=> fossil fuel prices will be lower by 2030?
FAO/OECD say agric prices will remain
high and volatile for next decade
But depends on whether:
• biofuel subsidies & mandates remain, grow or die
• Fossil fuel prices stay high (boosts biofuel demand)
• Carbon/GHG tax’n continues to be postponed
FAO real food price index, 1990-07/2012
– a third spike is starting following northern summer heat
Real international price indexes,
1960 to 07/12 (World Bank, 2000 = 100)
Prices from our core 2030 simulation
We take an intermediate position between
20th century and current forecasts (so closer
to World Bank than IEA and FAO/OECD)
But we explore two alternative scenarios:
Slower global TFP growth in primary sectors
• causes int’l primary product prices to rise much more
Faster grain TFP growth in China and India
• as might happen if they approve GM food crop prod’n
• causes int’l grain prices to rise by 5 percentage points less
by 2030 than in core baseline
Cumulative changes in international prices,
2007-2030, alternative scenarios (%)
Summary of GDP & endowment
growth rates, 2007-2030 (% p.a.)
High- Devel- … Asia … LAC
(excl Mex)
income oping
GDP growth
1.6
5.1
6.2
3.5
Population
0.3
1.0
0.8
0.8
Unskilled labor
-0.6
0.4
0.1
0.6
Skilled labor
1.4
3.1
3.0
3.2
Capital
1.2
4.7
5.4
3.5
Agric. land
-0.3
-0.1
-0.2
0.3
Oil
2.1
1.5
0.9
5.2
Gas
0.3
2.5
1.1
1.9
Coal
-0.3
4.3
4.5
5.3
Other minerals
2.1
2.1
2.1
2.1
Total
2.5
0.9
-0.4
1.7
2.3
-0.2
1.7
1.4
2.9
2.1
Endogenous TFP growth rates,
2007-2030Manuf
(%& p.a.)
Agric&food
Other
Services
W. Europe
E. Europe&CIS
US&Can
Aust&NZ
Japan
China
EastAsia
SouthAsia
Mexico
Argentina
Brazil
RestLAC
MENA
SubSAfrica
TOTAL WORLD
Fuels
1.2
1.7
1.5
1.3
1.3
4.4
2.0
4.1
0.7
1.9
1.5
1.1
1.3
1.8
1.8
2.2
2.7
2.6
2.3
2.3
4.4
3.1
4.3
1.7
3.0
2.5
2.1
2.3
2.9
2.6
primary
2.2
2.7
2.6
2.3
2.3
5.4
3.1
5.2
1.7
3.0
2.5
2.1
2.3
2.9
2.8
0.7
1.2
1.0
0.8
0.7
3.8
1.5
3.6
0.2
1.4
1.0
0.6
0.8
1.3
1.2
Regional shares of global GDP, %
Core 2030 baseline scenario:
Projected size of HICs and DCs
World GDP
share (%)
World population
Relative
share (%)
GDP per cap (%)
2007
2030
2007
2030
High-income
74
54
20
17
Developing
26
46
80
83
33
56
of which Asia:
15
32
54
53
27
60
5
6
7
7
73
82
LAC (ex. Mex):
World
100 100
100 100
2007
2030
376 320
100 100
HIC & DC shares of global exports, by sector (%)
Primary
goods (%)
Manuf.
goods (%)
Services (%)
2007
2030
2007
2030
2007 2030
High-income
7
9
43
25
13 10
Developing
9
11
23
38
5
8
of which Asia:
1.5
1.8
17
32
3
3
LAC (ex. Mex):
1.6
2.8
1.7
1.2
0.6 0.4
16
19
66
63
18 18
World
Implications for agric imports by Dev. Asia
Dev. Asia’s share of global ag and food
imports rises from 15% in 2007 to 40%
in 2030
mainly due to China (goes from 4% to 27%)
Dev. Asia’s agric self-sufficiency falls from
98% to 92%
mainly due to China (goes from 98% to 88%)
=> Unlikely to be tolerated politically?
HIC & DC shares of global ag. trade,
including intra-EU27 trade
World export World import
share (%)
share (%)
High-income
Developing
of which Asia:
LAC (ex. Mex):
World
2007 2030
2007 2030
65 62
35 38
14 11
13 17
100 100
68 43
32 57
15 40
4
4
100 100
Global agric export shares (%),
including intra-EU27 trade
Global agric import shares (%),
including intra-EU27 trade
‘Revealed’ comparative advantage index
What does this imply about food
security?
Many food-deficit countries worry about
food self-sufficiency
But a better indicator of access to food
is food household consumption in real
terms (i.e at constant prices)
At least national average (but ideally also
its distribution across individuals)
Agric self sufficiency (%)
2007
base
All HICs
China
South Asia
East Asia
LAC ex.Mex
2030
core
2030 slow
prim TFP
2030 fast
Ch/In
grainTFP
110
109
100
110
98
88
88
89
100
97
100
97
98
100
97
99
116
129
126
128
China/India food self-suff. & food access
is higher with faster grain TFP
Ch/In rice and wheat self sufficiency rates are
2 percentage points higher in 2030 than 2007
if their grain TFP growth is 1% p.a. higher
China/India’s household food cons’n in 2030
would be 2 percentage points higher than in
core case
N.B. Ch/In grain TFP acceleration would be
shared by ROW (e.g. SSAfrica, but also LAC)
But these differences are small compared with
overall growth in access to food ...
... which occurs most where poverty is greatest,
i.e. in Sub-Saharan Africa and South Asia
% increase in real per capita
household food consumption, 2007-2030
Dev. Asia to become far larger part of
global economy in many respects (%)
... but it is mostly a China story
Bilateral trade projections, 2007-30
LAC, like other natural resource-rich (NRR)
countries, expands its share of total world
exports between 2007 and 2030 by about 1/6th ...
... but they quadruple their share going to China
China increases its global import share by 2.5
times ...
... but quadruples its share of global imports
coming from NNR countries
Share of LAC exports to China as % of
global exports of all products
How intense will exports to China be
for LAC rel. to other NRR countries?
If current resistances to trade continue
(distance, language, ...), model projects
LAC’s index of primary product export
intensity to China will drop a little
But outcome is uncertain
Will depend in part on intensity of Chinese
DFI in natural resource sectors over next
two decades in LAC, SSAfrica, Australia, etc.
Bilateral agriculture and food trade
projections, 2007 to 2030
LAC and other NRR countries expand
5-fold their share of global agric
exports going to China
But LAC is not the only one to do so
US&Europe, e.g., expand 9-fold their
share of global ag exports going to China
Hence the drop in intensity of LAC’s
exports to China – unless they promote
better than others
Index of intensity of LAC exports to China
(% of LAC exports going to China divided by
China’s share of global imports)
Some caveats
Standard caveats to this kind of global
trade modelling apply. Note in particular:
We may be missing some key structural
changes over time
• Small initial trade flows persist in Armingtondominated modeling (so understating South Asia’s
growth?)
• Increasing fragmentation of manuf along the
value chain is not incorporated (so understating
manuf trade growth?)
We assume current trade policies continue
• Could be very sensitive as Asian industrialization
proceeds, and esp. as China’s food self-suff. falls
East Asia’s agric protection growth,
1955-2010
Relative Rate of Assistance, %
250
200
Korea
150
Japan
100
Taiwan
50
0
7
India
8
9
ASEAN
-50
China
-100
10
ln GDP per capita
11
Summary of key points
Asian DCs are likely to see their steeply increasing
shares of global GDP and trade continue
Food self sufficiency will decline non-trivially in China
under current policies ...
• ... adding political pressure for agric supports/higher tariffs
Natural resource rich-countries will increase their
shares of global trade
Particularly their primary exports to China, and more so
for those NRR regions that welcome Chinese FDI in
resource sectors
And provided China does not raise food import barriers
or slow its economic growth and industrialization
Thanks!
kym.anderson@adelaide.edu.au
astrutt@waikato.ac.nz
Assumed real GDP & endowment
growth rates, 2007-2030 (% p.a.)
GDP growth
Population growth
Unskilled labour
Skilled labour
Produced capital
Mexico
Argentina
Brazil
Chile
Rest LAmerica
China
East Asia
South Asia
MENA
SSAfrica
WEurope
EEurope
USC
ANZ
Japan
HICs
Developing
of which LAC (ex.Mex)
2.9
3.8
3.5
3.1
3.4
8.0
3.9
7.1
4.1
5.3
1.3
2.9
2.0
2.3
0.9
1.6
5.1
3.5
0.7
0.8
0.6
0.8
1.1
0.4
0.8
1.2
1.4
2.1
0.1
-0.1
0.8
1.1
-0.2
0.3
1.0
0.8
0.8
0.0
0.4
0.7
1.0
-0.1
-0.2
1.4
0.6
1.8
-1.3
-0.7
0.1
0.3
-1.5
-0.6
0.4
0.6
3.0
3.3
2.9
3.0
3.7
2.8
2.5
4.1
3.9
4.5
1.3
1.3
1.6
1.9
0.8
1.4
3.1
3.2
3.4
3.5
3.6
2.6
3.4
7.4
3.7
4.9
4.2
4.8
1.2
2.8
1.0
1.7
0.9
1.2
4.7
3.5
World
2.6
0.9
-0.4
1.7
2.3
Resource-Rich vs Resource-Poor Regions
(based on net trade specializ’n in primary products, 2005-09)
Natural Resource Rich
Russia
Argentina
Cent. Asia
Brazil
Canada
Chile
Australia
Mexico
NZ
Peru
Indonesia
Rest LAC
Malaysia
ME/NAfrica
Vietnam
SSAfrica
Pacific Is.
Natural Resource Poor
USA
Western Europe
Eastern Eur (ex. Russia)
Japan
China
E. Asian NIE4
South Asia
Thailand
Philippines
Global total trade shares, 2007 & 2030 (%)
2007 base
LAC
Importer: ex.Mex
Exporter:
LAC ex.Mex
0.8
Other NRRich
0.5
US&Europe
1.5
China
0.3
Other Asia
0.4
Total
3.4
Other
NRRich
US &
Europe
China
Other
Asia
Total
world
0.5
2.7
9.0
1.7
3.1
17.0
1.9
11.4
35.7
4.2
5.6
58.8
0.3
1.4
1.5
0.0
3.1
6.4
0.4
4.6
4.1
2.1
3.3
14.5
3.8
20.5
51.8
8.3
15.5
100.0
Other
NRRich
US &
Europe
China
Other
Asia
Total
world
0.5
3.8
6.6
4.9
3.3
19.1
1.4
8.9
20.3
9.5
4.7
44.8
1.4
5.4
2.8
0.0
5.7
15.3
0.4
5.4
2.9
5.3
2.8
16.9
4.4
24.1
33.8
20.7
17.0
100.0
2030 core
LAC
Importer: ex.Mex
Exporter:
LAC ex.Mex
0.7
Other NRRich
0.6
US&Europe
1.2
China
1.0
Other Asia
0.5
Total
3.9
Global agric trade shares, 2007 & 2030(%)
2007 base
LAC
Importer: ex.Mex
Exporter:
LAC ex.Mex
2.0
Other NRRich
0.5
US&Europe
1.4
China
0.1
Other Asia
0.1
Total
4.0
Other
NRRich
US &
Europe
China
Other
Asia
Total
world
2.8
6.2
9.9
0.9
2.1
21.9
5.7
8.9
39.5
1.2
1.7
57.0
1.2
1.4
1.2
0.0
0.4
4.2
1.2
4.1
4.1
1.7
1.8
12.9
12.9
21.1
56.1
3.9
6.1
100.0
Other
NRRich
US &
Europe
China
Other
Asia
Total
world
3.2
6.4
9.9
0.2
1.7
21.3
3.7
6.0
25.8
0.2
0.9
36.5
6.8
7.1
10.7
0.0
2.0
26.6
1.5
4.6
4.3
0.2
1.5
12.1
16.8
24.5
52.0
0.6
6.2
100.0
2030 core
LAC
Importer: ex.Mex
Exporter:
LAC ex.Mex
1.8
Other NRRich
0.4
US&Europe
1.2
China
0.0
Other Asia
0.0
Total
3.5
Global non-ag primary product trade shares,
2007 & 2030(%)
2007 base
LAC
Exporter: ex.Mex
Importer:
LAC ex.Mex
1.0
Other NRRich
1.3
US&Europe
0.1
China
0.0
Other Asia
0.0
Total
2.5
Other
NRRich
US &
Europe
China
Other
Asia
Total
world
0.3
4.5
1.4
0.1
0.1
6.4
4.2
39.4
9.0
0.1
0.1
52.8
1.2
7.2
0.3
0.0
0.7
9.4
1.3
26.3
0.8
0.4
0.2
29.0
8.0
78.8
11.7
0.5
1.1
100.0
Other
NRRich
US &
Europe
China
Other
Asia
Total
world
0.3
6.4
1.5
0.1
0.1
8.4
4.1
14.6
6.5
0.2
0.1
25.4
6.2
27.0
3.0
0.0
2.2
38.4
1.8
22.8
1.3
0.3
0.2
26.4
13.3
71.1
12.4
0.5
2.7
100.0
2030 core
LAC
Exporter: ex.Mex
Importer:
LAC ex.Mex
1.0
Other NRRich
0.4
US&Europe
0.1
China
0.0
Other Asia
0.0
Total
1.4
Bilateral non-agric primary product
trade projections, 2007 to 2030
LAC nearly doubles its share of global
exports of non-ag primary products
Most of increase goes to China (5-fold boost)
Other NRRich also raise their share nearly
4-fold to China
while reducing by two-thirds their large
share currently going to US+Europe