Influence of agricultural, trade and food policies on diets

Bhavani Shankar

This presentation

• Overview of dietary implications of agri-food policies not explicitly targeted at nutrition.

• Agricultural policy, trade policy and consumer policy.

• Focus mostly on LMICs.

• Particularly important or interesting aspects – not comprehensive.

Conceptual framework

Price policies systematic review

Agri-food policy and diets: Nature of available evidence

• Preponderance of analysis of trends, anecdotal evidence.

• Surprising relative lack of research involving economists.

• Some conventional wisdom does not stand up to closer scrutiny.

Ag. Policy: Producer support and diets

• Public health narrative: Producer support in high income countries led to worsening diets and health outcomes.

• Closer examination by economists finds little support for this:oSupport usually acted as a tax on consumers.

o In any case, price transmission and impact on final consumers low.

oThus policy reform may have actually worsened diets slightly.

• Support levels in LMICs have historically been much lower and there is little evidence on dietary impacts.

Ag. Policy: Ag. investments & diets

Do green revolution investments and other rural public expenditures improve diets?

• Headey and Hoddinott (2016): oRice yield growth in Bangladesh associated with earlier introduction of

complementary child feeding and child weight gain.oBut rice yield growth has done little for dietary diversity.

• Tak and Shankar (ongoing):oMarket infrastructure and production diversity (but not road

infrastructure) improve dietary diversity in India.oWork ongoing on associations between rural public expenditures (agri.

R&D, infrastructure expenditures, irrigation expenditures, etc. and dietary diversity).

Trade Policy: Trade liberalization & diets

What has been the impact of GATT/WTO/RTAs induced liberalization on diets?

• Modelling efforts have seldom focused explicitly on consumption and diets.

• Apart from raising incomes, liberalization tends to raise commodity prices.

• Modest commodity price increases + low price elasticities + low transmission suggest minor effects on diets.

However…

Trade policy: Food availability and multinationals

Thesis: liberalization has facilitated FDI particularly in ultra-processed food (UPF)

UPF and multinationals:

• Economies of scale

• Branding and marketing

• High margins

Baker et al (2015): Apart from lowering tariff and non-tariff barriers, trade agreements reduce the “policy space” – freedom, scope and instruments to introduce health-oriented domestic food policy.

Trade policy: Food availability and multinationals• Stuckler et al. (2012):

oMain determinants of UPF sales, such as income and urbanisation, are less important in countries with high penetration of multinationals.

oHaving a trade agreement with the US is associated with a 63% higher soft drink consumption per capita.

• Observations on literature:o Individual commodity rather than whole diet perspective, mostly.

oMuch less attention to trade and healthy food intake, eg. fruit and veg.

o Involvement of economists still low!

Trade liberalization & habit formation: Let them not eat cake?!

Atkin (2013):

• Too often trade theory assumes identical preferences.

• But tastes in autarky correlated to local endowments.

• Habit formation: tastes change slowly.

Trade liberalization & habit formation: Let them not eat cake?! (contd.)• Liberalization raises relative prices of these preferred local foods.

• Since preferences sticky, preferred food more expensive and consumption gains from trade reduced in short run.

• Long run: food tastes adapt and consumption gains from liberalization finally achieved.

• Food price crisis: oStandard model: Transfer income from exporters, allow consumers to

substitute into relatively cheap foods.

oHabit formation: A bit more sympathy for export bans as a way of reducing hunger among the poor!

Consumer policy: food subsidies

Jensen and Miller:

• Do staple subsidies necessarily improve nutrition?

• Wealth and substitution effects of subsidies.

• Where wealth effect is large and ‘non-nutritional attributes’ are preferred, subsidies need not improve nutrition.

• RCT with food vouchers for staples (rice and wheat flour) in two provinces of China

• Results: no evidence of improved nutrition as a result of subsidy.

• In one province, households reduced all items in main meal (rice, tofu, spinach, oil) to increase fish consumption.

Consumer policy: India’s Public Distribution System• India’s PDS is world’s largest food policy – subsidised rice and wheat to

0.5 billion people per year.• Massive inefficiencies increased targeting from 1997, but targeting

poor in practice.• 2000s - some states have embarked on a ‘new PDS’ – more inclusive and

more generous subsidies. • Kishore & Chakrabarti (2015): rice price subsidy increased rice

consumption, but also pulses, vegetables, oil (but not meat/eggs/dairy).• Rahman (2015): Comparing targeted versus new universal programme,

universal PDS improves nutrient intakes across the board compared to targeted.

• Positive implications for quasi-universal PDS plans under India’s new National Food Security act.