By Thomas Dorr

Multiple initiatives are playing out in global trade development. Atlantic, Pacific, APEC, and Latin regions of the globe are all discussing multilateral and bilateral trade arrangements to enhance economic opportunities. 

The intention is to fairly leverage the resources and capabilities unique to individual countries and regions of the world. These initiatives are particularly important when developing policies to deal with global food security and safety. 

As Lisa Moon and Andrea Durkin recently pointed out in their column, “Leverage trade policy to tap future food markets,”  it’s important to understand how best to maintain a competitive edge in advancing food security in an increasingly integrated and dynamic world. The focus should be on anticipating the direction of change and getting ahead of it.

But that will require new strategies and new thinking on behalf of policy leaders.

During my tenure at the US Grains Council, a group of futurists, Foresight Alliance, conducted a thoughtful study. This study, entitled FOOD 2040, was initiated by the Council with guidance and support from the USDA’s Foreign Agriculture Service.

The study pointed out that many technologies and regulatory systems currently used to produce, process, and deliver food were born of a U.S. commodity-based system which took about 150 years to mature.  Government funded research and development, supported through the land-grant university system, provided a source of educated and efficient farmers who provided commodity grains, fiber, oilseeds, and animal protein to build a safe, secure domestic food system. 

This occurred within a political framework designed to secure property rights and contract sanctity through the rule of law. The system was supported with a predictable set of regulatory guidelines. Elements of this system are still essential and should serve as models for emerging economies. But it is clear that some elements are likely to be outdated and superseded by new technologies and systems which are already being developed overseas.

Take China, for example. Newly emerging middle-class economies, and the new markets they are driving, will be built in China (and many other countries) on their own more immediate and expansive needs. 

They will take full advantage of current technologies. Most importantly, they will find many opportunities to leap ahead of the legacy systems in use in the U.S. and elsewhere. There will be less focus on commodity trade and more on high-value, high-quality prepared food products.

From a Chinese perspective, this is a straightforward search for new opportunity and comparative advantage.  From the perspective of legacy systems in the U.S. and elsewhere, it presents a challenge.  The emerging middle-class economies of the world are moving faster than our bureaucracies.

It is important that policy, industry and government leaders –  particularly western leaders – recognize it is not assured that these significant new food opportunities can or will be forced into 20th century U.S. style commodity-based food production, processing, marketing and distribution systems.

A fact often overlooked by many western policy and business leaders is the stunning impact this new growth implies relative to economic purchasing power for food. 

Consider that, in 1950 there were less than 45 countries generating more than $2 per capita per day in gross domestic product (GDP).  Today, 96 percent of the world’s population and approximately 80 percent of the global GDP reside outside the U.S.  Increased political stability, trade liberalization, global economic growth, education and technology have created new opportunities and led to the development of new industrial production models.

From 1990-2020 the world will or will have added 2 billion people to the emerging global middle class.  This equates to a minimum sustained new year over year annual demand for food at a nominal value of $2 trillion USD.  This is equivalent to 2.8 percent of the 2011-12 global GDP.

This should result, using the normal assumption that 15 percent of every food dollar is left at the farm gate, in a $300 billion USD growth in new annual international farm gate demand.  Equally important, it suggests that an additional $1.7 trillion USD equivalent will be spent on developing new production, processing, packaging, distribution, product development and, importantly, new systems of trust for these new market opportunities.

This means there will be new opportunities and growth across the agriculture and food value chain.  More importantly, given the location of these burgeoning new food markets, I suspect few, if any, of these new systems will automatically be driven by existing traditional U.S. or international standards or regulatory systems. 

It will not take the Chinese, or any of the emerging Asian and African economies, anywhere near 150 years to define the new and modern food system being demanded of their emerging urbanized middle-class economies. Yet, we must recognize that many of these emerging economies do not have similar natural resources, populations or the time to build a commodity-driven agricultural and food system similar to that of the United States.  Land and water constraints and differing population densities mean that a U.S. style system is simply not achievable in many of these emerging economies. But developing these new food systems won’t be easy.

The Chinese have experienced challenges regarding the strength of their systems of trust, as well as overseeing the nation’s supply chains and food safety standards.  This is not unusual.  The U.S. faced many such problems over the generations in which she developed, by trial and error, the system we have today.  

China understands these matters and has the resources and technology to create a new 21st century model that achieves her objectives.  But global supply chains, which is what this must be a part of, have to be built in cooperation with global partners.

China has the economic, social, governance and political resources necessary to purchase what it desires beyond its ability to produce.  China has the intellectual, financial and government resources to build global supply chains to enhance and expand its domestic production base. As a result, China may well become a 21st century leader in this new model of excellence.

But global systems require global partnerships.  We should and must collaborate with international partners to build these new models.  In the context of creating a globally secure supply chain, there is a key policy issue with which we must deal and that’s trade policy.  The only long-term means to food security is through thoughtful and sustainable free-trade policies coordinated with developing new, effective and safe technologies. 

If these new global markets are to succeed and allocate resources efficiently, these policies must be market-driven, transparent, predictable and easily fungible.  We will develop trade policies around new or modified 21st century market and technology definitions.  This will challenge traditional U.S. leadership in several areas.  Policies, technologies, and regulatory systems, born of our commodity based systems and driven by our 20th century domestic demand-driven markets, will frequently be ill-serving to the cause, at best, and usually inadequate.

However, if we make the effort to recognize the scope of this new $2 trillion USD year-over-year demand for high-quality, ethnically acceptable food, the rewards will be substantial.  We will hasten the effort and shorten the path to what is desired by all – an efficient, safe, open and far more sustainable Global Food Security System.  It will be a value-added 21st century food system versus the commodity-based system of the 20th century.

About the author: Thomas Dorr is an Iowa farmer who served as the USDA Under Secretary for Rural Development in the George W. Bush Administration and was CEO of the U.S. Grains Council, a non-profit organization that promotes the use of U.S. barley, corn and sorghum and related products worldwide.