Globalization, Trade, and Rural Development

LECTURE 4
Globalization, trade and rural development

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1. Globalization & the transformation of food systems
 Globalization
 Rapid growth of world trade,  Internationalization of production by multinational corporations and  Declining information & communications costs due to progress in technology

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Advance of retail chains: top 10 world 2007

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Nestlé global
 Drinks, ice cream, baby food, bottled water, breakfast cereals, coffee, chocolate, culinary, dairy  2010
 Sales: 109.7 billions CHF  Net profit: 34.2 billions CHF (31.2% of sales)

 2011
 Sales: 83.6 billions CHF  Net profit: 12.5 billions CHF (31.2% of sales) (Exchange rate: 1 USD = 0.91 CHF)

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1. Globalization & the transformation of food systems
 Three aspects for potential trade benefits for agriculture
 possibility of direct increased exposure of agriculture to international competition,  indirect effects of increased international trade on the growth of non-agricultural sectors changing the domestic demand for agricultural goods  lifestyle changes including diets, particularly among the urban middle class
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1. Globalization & the transformation of food systems
 Rising food imports
 Increased developing country imports of cereals and livestock products: increased demand & low competitiveness of domestic agriculture.  Growing food imports: inflows of lower priced food from subsidised agriculture in developed countries.  Rapid urbanisation, growth of mega-cities on the coast
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1. Globalization & the transformation of food systems
 Vertical integration of the food supply chain
 urban food demand accompanied by consolidation in the retail sector  dominance of supermarkets  substantial organisational and institutional changes throughout the food marketing chain  private grades and standards for food quality and safety applied  adoption of contracts between buyers and sellers  existence of small traders and small business, central

References:  Pingali, Prahu, 2006. Agricultural Growth and Economic Development: A View through the Globalization Lens. Presidential Address to the 26th International Conference of Agricultural Economists, Gold Coast, Australia, 12 – 18th August, 2006. Swinnen, Johan. 2004. “The Impact of Globalization on Agricultural Development and Rural Poverty in Transition Countries.” Proceeding from Agricultural Development and Rural Poverty under Globalization: Asymmetric Processes and Differentiated Outcomes. Florence, Italy, September 8 – 11. Bautista and Valdez. 1993. “The Relevance of Trade and Microeconomic Policies for Agriculture.” In Bautista and Valdez (eds.). The Bias against Agriculture: Trade and Macroeconomic Policies in Developing Countries. San Francisco, CA: Institute for Contemporary Studies Press   32