Is international trade causing obesity in developing countries?


Bachelor Thesis, 2014
42 Pages, Grade: A

Excerpt

Contents

Introduction

Developing Countries And Trade Liberalization

Diet Change And Obesity In The Developing World

The Role Of Big Food Corporations

Foreign Direct Investment

Trade Agreements: The North American Free Trade Agreement

The Pacific Island Nations, The Case Of Micronesia

Trade Agreements: Central America-Dominican Republic Free Trade Agreement.

Obesity Levels And Socio-Economic Status

The Global Food System

Liberalization Of Markets In Africa

Income, Price Fluctuations And Consumer Behavior

Food Sovereignty- A Solution To Food Issues?

Food Corporation Reaching The Remote Areas And Emerging Markets

The Economic Theory: Supply And Demand

Supply And Demand After Trade

(WHO) Obesity Ranking: The Top Ten Countries Case Study

Results

Increased Imports Of Processed Food Over Time

What Globalization Did To Consumer Behavior

Future Of Processed Food On The Global Scale

Conclusion

Bibliography

Is International trade causing obesity in developing countries?

An Honors Program Thesis

By

Mathilde Bringsjord Laderud

Spring, 2014

Economics

Introduction

The industrialized world has, for the past decades, been severely affected by high rates of overweight and obesity. The epidemic of obesity has for a long time had the strongest effect on Western and English speaking countries such as the US, the UK and Australia. Today, more than 1.1 billion adults are overweight, and 312 million of them are obese (Parvez, Bisher, & El Nahas, 2007). The main factor causing increased rates of obesity has been the development of unhealthy eating habits with diets consisting of meat, fat, sugar, and refined foods low in fiber. Such eating habits have been common for people living in the western hemisphere the last couple of centuries. Thus the term ‘the Western diet’ originated. The other major factor linked to obesity is lowered physical activity, which followed as a consequence of the industrial revolution. The Industrialization process gradually reduced physical labor in the centuries following the revolution as new technological advancements made life easier. The shift from agriculture and heavy work towards a sedentary lifestyle significantly decreased physical activity. People in the industrialized world moved to the cities and started working in factories or offices and spent most of their days inside. This modern type work replaced traditional manual labor work. Today, people use less energy in modern work settings and significant amount of time is now spent in front of the computer or television.

In addition, people today consume more energy than what their bodies require for the amount of physical activity they perform. In some cases people even binge eat without doing any form of activity. Major technological and economic innovations have deeply influenced what and how people eat. Consequently this has affected the health of people all over the world today. What we can gather from the past is that not every technological development will benefit the health of humans (Gardner & Halwell, 2000). The likeliness of gaining surplus weight is a lot higher than it was in past centuries. For the last decade nutritionists and researchers have established several causes for the high rate of obesity in developed countries. However, as western countries are becoming aware of the adverse health effects of the ‘western diet’, poorer countries are starting to see obesity rates far outpacing numbers in the developed world. Little attention has been paid to the rapid rates of obesity occurring in the poorer countries of the world, far extending the rates observed in the developed world. Half of the world’s overweight people live in just nine countries – China, United States, Germany, India, Russia, Brazil, Mexico, Indonesia and Turkey, which is evidence that obesity is not an epidemic restricted only to rich countries (TheWorldBank, 2013)

The purpose of this research paper is to explore the relationship between international trade and obesity. I start by looking at trade agreements such as the North American Free Trade Agreement. I look at the role of multinational corporations (MNCs) such as Nestle, Unilever or PepsiCo and how they have influenced domestic markets in term of price and preference. The level of foreign direct investment (FDI) with the spread of supermarkets and Wal-Mart’s have made western food product available at lower prices than what domestic producers can offer. I look at the ten most obese countries in the world specifically by examining imports and exports over time. I found that, the countries with the highest levels of obesity are small island nations mostly in the Pacific region. I also found that, the level of imports of unhealthy food products has significantly increased since the 1990’s. As fresh, healthier food products such as fish, fruits and vegetables are exported abroad; an increased amount of unhealthy food products enters domestic markets. Several factors could play a part in explaining such high levels of obesity, but the level of influence by foreign MNC’s is proven to be one of the strongest causes. As developing countries progress, urbanization and higher income will at first lead to increased intake of unhealthy food products. However, rising income does not necessarily result in higher intake of junk food, unless there is a high presence of foreign direct investment (FDI) and infiltration of western type food commodities. I therefore suggest that international trade with the influence of foreign direct investment and multinational corporations is boosting the spread of obesity throughout developing countries.

Developing Countries And Trade Liberalization

The world’s poorest countries have, for centuries, struggled to keep up with the high growth levels that have shaped developed countries since the industrial revolution. The developed countries have proposed several suggestions to boost growth rates in developing countries. The major suggestion has been to encourage international trade and reduce any form of trade barriers. Within the last half-century, the volume of merchandise traded globally increased by 17-fold, more than three times faster than the growth in world economic output (Rayner, Hawkes, Lang, & Bello, 2006). Developing countries choosing to liberalize their markets have done so after multiple recommendations from superpowers, developed nations and international organizations such as the WTO, IMF and the World Bank. Globalization in the terms of increased trade and free flow of goods and services has been the goal of these institutions since they were created. Increased trade has also been the objective of multinational corporations trying to increase growth by extending their business abroad. The developing world, since trade liberalization, has been flooded with goods similar to what we can find in Western Markets (Rayner et al., 2006). Even the poorest areas of the world now have access to major brand products such as Coke or confectionaries produced by Nestle. Trade is not a new phenomenon and human societies have been trading with each other throughout history. Barter and exchange is regarded as inherently human social qualities. Within the last century, the volume of trade in goods and services has reached record levels and it is now occurring at a much wider global scale. Trading arrangements have become increasingly unfair, where trade laws are benefitting developed countries to a higher degree. Already far behind economically, developing countries are left to cope with the rise of global production chains, liberalization of global financial flows and the unequal dominance of advanced economies having the advantage in trade negotiations (Ronald, Katia, & Raphael, 2011).

Diet Change And Obesity In The Developing World

The developing world has experienced high rates of obesity for the same reasons as developed countries. Obesity spread to developing nations first among urban middle-aged adults, but has also increasingly been affecting semi-urban areas, rural areas, and younger age groups. Within the developing nations obesity is increasing for several reasons. The influence of the ‘Western diet’ is one of the factors (Prentice, 2006). Changes in eating habits and physical activity patterns are the two most visible changes first occurring. However, international trade and the infiltration of unhealthy food products happened rapidly in the developing world and further boosted diet change, causing alarmingly high rates of obesity. Consequences of rising obesity levels in developing countries include serious health effect such as non-communicable diseases. These have led to about 18 million deaths every year from cardiovascular disease, for which diabetes and hypertension are major factors. Such health effects are especially felt by poorer nations because these health issues represent an additional burden that will overwhelm their poorly resourced health care systems. The industrialization process, which can be linked to changes in diet and physical activity, has therefore occurred at a much faster pace in developing countries than it did in the developed world (Drewnowski & Popkin, 2007).

Today there are more obese people in the developing and newly industrialized world than there are in the developed world (Delpeuch, Maire, Monnier, & Holdsworth, 2009). Unfortunately, the reality today is that the heaviest people are the ones with the lightest wallets. Food is produced in surplus today, which means that people with a limited budget are not forced to starve. People with lighter wallets are on the other hand struggling to afford a varied and healthy diet. Food products such as fruits and vegetables are too expensive to be included in budgets of struggling families. Simultaneously, fast food companies are expanding in lower income countries. The total number of McDonald’s restaurants in Asia and Pacific jumped from 1458 to 6775 from 1991 to 2001. The numbers are similar with other fast food chains such as KFC and Burger King (Delpeuch et al., 2009). Today the diet shift in developing countries is enhanced by the introduction of unhealthy food and fast food chains entering markets of developing countries.

The Role Of Big Food Corporations

The diet change is linked to urbanization and development. As a society develops, advertising and the spread of supermarkets and fast-food outlets increase. People in developing nations will experience economic growth and spend their increased salaries on diets that include a greater proportion of fats and caloric sweeteners(Popkin, Adair, & Ng, 2012). The products coming from Western companies are often offered at a lower price than domestic traditional food products. Food products entering markets in developing countries are set at such low price levels partly because U.S. exports and market prices are set below the cost of production. For example, wheat was exported at an average price 43% below cost of production. (Rosset, 2006) Therefore, the products made domestically have trouble competing with imported goods set at unrealistic low prices.

Food corporations want to set prices at the lowest level possible in order to compete in world markets. To make up for these low prices western countries subsidizes its agriculture in order to have family farms working. However, subsidies are not the only reason why prices are so low, it is rather the opposite; subsidies are triggered by low prices. When prices are low subsidies rise, and when prices are high subsidies drop. Farm policy used to make sure farmers didn’t overproduce, or to make sure prices were not falling too low. Today however, there are no limit to how low prices can fall or how much can be produced. It is therefore argued that cutting subsidies would not stop dumping from happening, and unbeatable low prices would still persist in developing countries. The crops leaving European and American borders are sold into developing countries at the same price as what farmers get. Developing countries cannot set prices at the same levels as the cost of production, because the revenue would be too small. Governments in developing nations cannot afford to subsidize local agricultural companies the same way as developed countries can. These subsidies are due to be reduced under the terms of the WTO, which gave member nations a 10 year moratorium from trade disputes related to agriculture, but expired in 2004. The EU and the US have made small adjustments in terms of their subsidies. Agricultural subsidies have been blamed for damaging the values of food exports from developing countries by suppressing world prices (Ronald et al., 2011).

Dumping is defined in trade terms as goods entering a foreign market at less than ‘normal’ prices. ‘Dumping’ makes it impossible for local farmers to compete in their own markets. The cause of ‘dumping’ is said to be the highly concentrated agricultural market consisting of only a few powerful corporations (Rosset, 2006). Superpowers and MNCs in the Western hemisphere have in an attempt to generate more wealth produced too much fat, sugar, oil and animal fats (Delpeuch. Et al, 2009). The food market in developed nations is already as saturated as it can be, meaning that companies are selling at the highest rates possible (a US. Child or adult consumes today 3800 kcal, nearly twice what is recommended on a daily basis). Transnational food companies, which are a consolidation of agricultural, food, and retail companies were forced to look for new ways to make profit. Companies then started expanding their market boundaries by exporting and investing in developing countries. The world’s poor has therefore become a vehicle for growth.

The World Food Summit in 1996 concluded that international food trade permitted consumption to exceed production and help modulate fluctuations in supply, but it was also noted that trade competition might disrupt traditional food production systems or introduce negative environmental consequences(Rayner et al., 2006). In order for trade to flow as free as possible into developing countries with low transaction costs, companies along with governments aimed to make favorable trade agreements with the global south. Trade laws and trade agreements do not benefit the rich and the poor equally. Trade liberalization is negatively correlated with income growth among the poorest 40 percent of the population, but positively correlated with income growth among higher income groups. In other words trade makes the rich get richer, and the poor get poorer (WTO, 2013). Trade agreements often favor rich countries while small businesses are left to compete against large corporations with lower production cost, who can offer products at a fraction of their price.

Foreign Direct Investment

Trade liberalization influences food and consumption trends from different levels. The effects on developing countries can be explained by factors such as food imports and exports, the local/global balance of internal dynamics of the food supply chain, FDI in food processing and retail and commercial promotion of food (Rayner et al., 2006). Food imports have had the most visible effect for the 49 least developed countries and by the end of the 1990’s imports were more than double than exports in these countries. FDI, foreign direct investments have also had an important role in shaping dietary habits and spreading highly processed foods. Cross border processed food has remained limited since the mid 1990’s, whereas FDI has exploded. Between 1988 and 1997, food industry FDI increased from US$743 million to US$3.3 billion in Asia and from US$222 million to US$2.1 billion in Latin America. US food companies sell five times more (US$150 billion) through FDI sales than through export sales. According to a former chief economist at the World Bank, the new trade rules, including the adjudication process on the rules and the required domestic disciplines reflect the priorities and needs of developed countries more than developing countries (Rayner et al., 2006). Others have argued that trade liberalization confuses mechanisms with outcomes. Even if the right technicalities are in place trade does not necessarily benefit all the countries included in a trade agreement. Developed countries usually come out of trade negotiations with the best deals. Secondly and still largely unnoticed are the health issues affecting developing countries after liberalization has occurred. Corporations try to maximize profit without considering health and environmental consequences. Population health may worsen if general working conditions deteriorate or if trade facilitates the transfer of disease or unhealthy consumer goods across borders.

Trade Agreements: The North American Free Trade Agreement

The NAFTA (North American Free Trade Agreement) between the US, Canada and Mexico is a trade agreement that has played an important role in shaping the food industry in those three countries and has affected eating habits in Mexico. What seperates the NAFTA treaty from previous treaties made between the US and other developing countries was the bending of domestic laws in Mexico (Hansen-Kuhn, K., Murphy, S., & Wallinga, D, 2012). Mexico had to adapt to new rules in order to comply with the treaty. First of all, the treaty did not take into consideration earlier treaties, which usually had included concessions for the poorer partner, known as special and differential treatment (safeguards). Although protection levels were lowered in Mexico high levels of protection remained for some food products in Canada and the US. One of many changes made after the signing of the NAFTA treaty was the abolishment of the law requiring cattle to be fed grass rather than corn. Feeding cows corn instead of grass is a cheaper and faster alternative, but it is environmentally unsustainable and has shown in some cases to harm the cows and the meat consumers (Kenner, Pearlstein, & Roberts, 2010)

NAFTA was negotiated between 1988 to 1999. In the same time period the average daily energy intake from fat increased from 23.5% to 30.3% and soda consumption increased by 37.2%(Hansen-Kuhn, 2012). Generally NAFTA has brought with it an increase in the amount of seasonal fruits and vegetables flowing north and an increase in the southward flow of commodity crops and livestock products. The removal of tariffs has forced Mexico to import a lot of the goods they earlier produced domestically. These products that the Mexicans heavily rely on in their diets, such as soybeans and corn are now imported from the US. Mexico is also the third largest target of foreign direct investement (FDI) by the US. US investment has been put heavily on Mexican livestock, and US corporations control an estimated 35% of Mexico's pork industry. FDI made the entry of large food retailers in Mexico ver easy. Wal-Mart is a famous example, who, in 2005 controlled about 20% of the total Mexican food retail sector. The amount of fast food outlets has expanded in Mexico, and you can today find a Mc Donalds restaurant in over 500 locations(Hansen-Kuhn, 2012). FDI influenced the food industry in Mexico and their expansion has been based on the unexamined assumption that increasing volumes of low price (low quality) food is good for producers and consumers. Today Mexico has one of the highest obesity rates in the world, and is projected to surpass the obesity rates in the United States (Prina & Royer, 2013).

The Pacific Island Nations, The Case Of Micronesia

The Pacific Island countries have for decades been dealing with foreign influence, which have had unfortunate results on the health of Micronesians. The Pacific Island country of Micronesia is surrounded by one of the richest tuna stocks in the world, however poor government policies have allowed foreign nations to buy fishing rights at a fraction of the real cost. A major shift occurred in 1993 when the Federated States of Micronesia (FSM) sold its fishing rights to Japan(Brownell & Yach, 2006). Japan along with other developed nations has played its role in shaping dietary changes in Micronesia. As an attempt to support the region with its economic problems the US and the United States Department of Agriculture (USDA) implemented a supplementary feeding program in Micronesia, which influenced people’s eating habits and taste preferences. The US implemented programs such as school lunches, which mostly consisted of rice and tinned food. US influence has had negative impacts in Micronesia, first because of loss of food production due to inconsistent external and internal government policies and unplanned externalities from U.S. food aid programs. Second, the overwhelming amount of imported food that has entered the Micronesian food markets has transformed eating habits on the islands. Eating habits in the past consisted mainly of fresh fish and other locally produced food products. The Federated States of Micronesia sit on tuna stocks, which has turned into a US$ 2 billion dollar industry in which the FSM only receive US$ 70 million, 3.5% of the total value (Cassels, 2006). Previously the people of Micronesia relied on local foods such as fresh tuna for consumption and as income for local fishermen. Fresh tuna is no longer affordable to regular inhabitants and consumption has therefore shifted towards nutrient poor packaged food, while tuna consumption has dropped significantly (Cassels, 2006).

Despite the abundance of fish offshore, fresh fish is consumed less today than it used to be. According to the Food and Agricultural Organization (FAO), Micronesian states imported 242 metric tons of canned fish in 1992; by 2001 the figure increased to 1,369 metric tons. Thus, much of the fish that Micronesians eat has been processed elsewhere and imported back into the country in packaged versions. Japan, the largest tuna harvester and consumer, harvest more than 90% of its tuna in the pacific, and nearly 40% from the Central Western Pacific in 1995. Due to insufficient infrastructure the FSM are not capable of harvesting the fish themselves, and instead sell their fishing rights to foreign nations. The pacific islands countries include the Solomon Islands, Papua New Guinea, Vanuatu, Samoa, Fiji, Kiribati, and Tonga. The truth, however is that although fish stock around these islands are abundant and would generate billions in revenue for these countries, only 11% is harvested by Pacific Island nations (Cassels, 2006).

The story of Micronesia is a sad example of how governments can be manipulated by more advanced authorities trying to enrich their own economies. The exploitation of the tuna industry and foreign influence directly affected the diet and forced Micronesians to rely heavily on food imports. It is estimated that the average Micronesian household spends 38% of its income on imported foods (Cassels, 2006). The shifting diet trends in Micronesia have gradually been imposed by historic foreign influence and dependence, along with enhanced global food trade. The rise in obesity observed during the last half of the 20th century can be explained by rising income, economic modernization and associated dietary change.

The diet became more westernized during US occupation, when US’ subsidies reached Micronesia in the 1960’s and 1970’s. The new cash based economy changed the local lifestyle. For example, Micronesians previously had to collect firewood, but the changes also brought purchasable technology such as propane stoves, which made cooking easier. These lifestyle changes, besides contributing to dietary change, also made exercise unnecessary. The combination of a poor diet and less exercise has made prevalence of obesity very high in Micronesia. The populations in the Micronesian states were not always in such bad shape. When the first explorers observed the Micronesians, they were described as being in excellent proportional shape. Around 1500-1600 the explorers refer to Pacific Islanders as “singularly tall, muscular and well proportioned people” and said “ I never saw men better made” Today the story is quite different and Micronesians may be some of the most obese people in the world (Cassels, 2006).

Trade Agreements: Central America-Dominican Republic Free Trade Agreement.

Trade liberalization is considered to be one of the main causes of the increasing rates of obesity in South and Central America. After markets are liberalized, governments often eliminate subsidies and other protectionist policies that in the past benefited local food producers and instead encourage imports of food sold at lower prices. Central America started its liberalization process in the 1980’s after consolidating trade agreements with the United States. Since the 80’s the trade has further developed between the two regions. In 2006 a new trade agreement was appointed; the Central America-Dominican Republic Free trade Agreement (CAFTA-DR). This agreement similar to NAFTA aimed to facilitate an increasing openness to trade, investments and services between the US and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. The former agreements made in the 80’s were expanded within the CAFTA-DR. In the 1980’s tariffs had been lifted for products from Central America entering markets in the United States. The new agreement however aimed to abolish and phase out tariffs for American produced goods to enter Central American markets (Hawkes & Thow, 2008). In 2004 the United States exported nearly US 16 billion in goods to Central American countries where US 1.8 billion were agricultural products. In the future the agreements between the United States and Central America will assist even larger quantities of American goods to enter Central America. The American farm Bureau Federation estimates the value of agricultural exports will increase by $1.5 billion annually until 2024.

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Excerpt out of 42 pages

Details

Title
Is international trade causing obesity in developing countries?
Course
Economics, international trade, obesity, corruption, developing countries, global south, nestle, Pacific Island Nations
Grade
A
Author
Year
2014
Pages
42
Catalog Number
V288762
ISBN (eBook)
9783668399303
ISBN (Book)
9783668399310
File size
827 KB
Language
English
Notes
I am a recent graduate that majored in international relations. I found my interest in obesity and specifically the epidemic of obesity rising in the developing south after reading about the marketing schemes taken by many corporations in the West. The reality is that the food market is already saturated in the US, where most Americans take in a lot more calories than needed taking into account that few still work in manual labor and burn a lot less than they consume. Corporations in a desperate state try to generate growth by looking towards emerging markets in the global south.
Tags
Economics, international trade, obesity, corruption, developing countries, global south, nestle, Pacific Island Nations, obesity epidemic, Amazon, Palau, Micronesia, The United States, The Western Diet, Health, Lifestyle, Trends
Quote paper
Mathilde Laderud (Author), 2014, Is international trade causing obesity in developing countries?, Munich, GRIN Verlag, https://www.grin.com/document/288762

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