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SPECIAL OTN Update

Economic and Trade Policies Rela ted to Diet and Obesity in CAR ICOM
The 37th Meeting of the Council on Trade and Economic Development (COTED) of the Caribbean Community (CARICOM) held in Georgetown, Guyana on 59 November 2013, recognized that trade and health related issues are areas for joint attention to foster improved sustainable development prospects in the Caribbean. The COTED therefore established a small working group coordinated by the Caribbean Public Health Agency (CARPHA), the Office of Trade Negotiations (OTN) and CARICOM, with inputs from entities,toprepareforajointmeetingofthe relevant COTED and the Council for Human and Social Development (COSHOD) in 2014, and the wider engagement with the regional food manufacturing industry. The proposed collaboration between CARPHA and CARICOM follows from the recognition by the Caribbean Commission on Health and Development in 2005 of the social and economic burden of non communicable diseases (NCDs), in large measure due to profound changes in the way of life of the people of the Region, including their diets and nutritional patterns, which had been heavily influenced by globalization of the food supply, mechanization, and decreased physical activity, tobaccouse,andharmfuluseofalcohol. The interface between agriculture, economic and tradepoliciesandnutritionisparticularlyrelevant in the context of efforts to address the rise in the incidence of noncommunicable diseases such as obesity, heart disease and diabetes which have become chronic in most Caribbean societies and shouldengagetheattentionofbothpolicymakers andtechnocratsalike. From the onset, it is important to emphasize the value of policy coherence in the thrust to address the problem of nutritionrelated diseases.

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

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Effective strategies to deal with noncommunicable diseases such as those caused by poor dietary intake should, of necessity, be holistic and should draw upon allrelevantsectorsincludinghealth,education,sports, environment, agricultureandtrade. In seeking to establish the link between trade and economic policies and nutrition, I draw heavily on undertaken by Adam Drewnowski, Andrew research Hanks and Trenton Smith in which they sought to examine the relationship between international trade, food and diet costs and the global obesity epidemic. They observed that energydense diets , rich in added sugars and fats, are far more affordable per unit of energy than diets composed of whole grains, lean meats, fish, lowfat dairy products and fresh fruits and vegetables. They note further that inexpensive starches, fats and sweets may represent the only viable food option for lowincome consumers and as a more people consume energydense diets, result, especially in lower income groups. These findings, which were based on research in the United States, may have relevance for the link between food costs and nutrition in the Caribbean and suggest that the low energy costs of the diet ($/1000 kcal) rather than the consumption of fast foods, sweets or deserts, per se,maybethemostpowerfulpredictorofweight gain and,byextension,ofnoncommunicablediseases. A cursory review of the changing diet of Caribbean countries will reveal a nutrition transition in which the traditional plantbased diets have been replaced with more sugars and vegetable and animal fats. International trade is likely to have propelled the growth of nutrition related diseases by increasing the availability and lowering the cost of these energy dense diets. Drewnowski, et al, examine five key propositions that link economic theory with public health findings increasingobesityratesand which maybear regarding relevance to the kind of economic and trade policies which may be used to address nutritionrelated diseases.Thesepropositionsare:
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

Internationaltradelowersfoodanddietcosts. Energy dense foods and diets costs less relativetonutrientrichfoodsanddiets. Consumption of energydense foods and diets increases as income declines and therefore lowcost, energy dense diets may contribute toovereatingbythepoor. The recent significant increases in global food prices may increase the likelihood that poor consumers will purchase energy dense diets, thus further contributing to the growth of obesityinthedevelopingworld.

Thefollowingisasummaryoftheirfindings: Proposition 1: World Trade has reduced the relativecostsofdietaryenergy. World trade has influenced the cost of energy dense foods. While trade is rightly credited with allowing the more efficient production of goods and services, it has also affected changes in economic organization that have reliably driven consumers towards the purchase of energydense processed foods. Viewed in the context of consumerchoice,whenaconsumerchoosesfood, heorsheisconstrainedbyincome,theavailability of time (to prepare and eat meals) and information (pertaining to the availability, preparation and effects of particular foods on health). These constraints are inextricably linked in a market economy. Any change in the relative cost (or price) of anyone of these factors is likely to induce changes in the consumption of the others. Tradedriven factors have reduced the relative cost of dietary energy in the developing world in four key ways: (i) the dramatic expansion of trade in the inputs to processed energydense foods (refined grains, sugarcane and corn sweeteners and vegetable oils) (ii) urbanization (iii) foreign direct investment and (iv) rising household incomes.

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The most direct effect of international trade on food and diet is probably via the stimulation of technologicalinnovationandproductionofvegetable oils and sugars and promotion of exports of these products through direct subsidies, credit guarantees, food aid and market development programmes. Global availability of corn, palm, palm kernel, rapeseed, soyabeanandsunfloweroilsurpassed100 million tons by 2005, more than twice the amount produced in 1995 and more than 13 times the world productionin1961. Technological advances in oilcrop yields and refining have greatly reduced the price of vegetable practices oils relative to meat or fresh produce and technological breakthroughs in the development of highyield oilseeds and in the refinement of high vegetable oils have further reduced the cost quality of baking and frying fats, margarine, spreads and saladandcookingoils. Global production of caloric sweeteners and their export has also increased over the past several decades. Sugars derived from cane, corn and sugar beetaccount foraprogressivelyhigherpercentageof energy in the global diet. Until recently the world priceof raw and refined sugars had shown a steady decline and according to some analyses of food balance data sweetener consumption by lower incomecountrieshasincreasedthemost. Urbanization: Trade between countries is advantageous because it allows for specialization in productiveactivity.Inpractice,however,thisleadsto employment of unskilled labour moving from agriculture to manufacturing, which in turn implies of workers from rural to urban areas. migration Physical access to healthy foods tends to be more limitedinpoorurbanareas. Foreign Direct investment: FDI into food processing increases the availability and lowers the costs of highlyprocessedfoods. Rising incomes: trade liberalization has contributed to economic growth and rising income in developing countries. However, the rise in income has led to the displacement of traditionalfoodculturesinfavourofenergydense processed foods. Moreover, as income rises the tendency is for the share of income spent on food to decrease, a principle in economics referred to asEngelslaw. Proposition 2: Energy dense foods and diets cost less;nutrientdensefoodsanddietscostmore. Several studies point to a negative correlation between energy density of food and energy cost. Monsivias and Drewnowski (2007) in 2006, using prices in supermarkets in Seattle, observed that fats and oils, sugar, refined grains, potatoes and beans provided the lowest cost dietary energy. Energy cost of vegetable oils and sugars was less than$1/MJ, whereas the cost of fresh produce was ten times as much. The energy cost of sweetened beverages was much lower than the cost of fruit juices or fresh fruit and the differential in energy costs of lettuce and lard was several thousand percent. The same results were obtained in 2000 using food prices in France. Refined grains, added sugars and fats were the lowest cost sources of dietary energy, whereas the more nutrient dense foods were associated withhigherenergycostsperMJ. If healthier foods cost more per unit of energy, it stands to reason that healthier diets would also cost more. Two main conclusions have arisen from observational studies relating to dietary energy density to energy costs. First, lower energy density is associated with higher energy costs and therefore energy dense diets costs less than low energy density diets. Second, higher nutrient density (which is used as an index of diet quality) is associated with higher energy costs. The studies revealed that the lowest cost diets were energy dense but nutrient poor. Although these studies were not undertaken in the Caribbean it may not be unreasonable to expect

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

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similar results for analyses of energy and diet costs in theRegion. Propositon 3: Consumption of energy dense foods andenergy densedietsincreaseasincomesdecline. Consistent with Engels law, referred to earlier, there is that the share of income spent on food evidence increases as income rises. The drop in food spending isdisproportionately greaterthanthedropinspending on other goods. At the same time there is evidence that the proportion of disposable income devoted to food is greater for lower income families than it is for higher income groups. In the United States, for example, evidence is accumulating that lower income families select lower cost but more energydense diets. ThesameislikelytobetrueformostCaribbean countries. Added fats and sugars account for a significant share of daily energy intakes and average diet composition has moved towards lower costs driven by changes in production technology, foods income distribution and relative prices. The consumption of fruits and vegetables has not kept pace with increases in daily energy intakes and fruit and vegetable consumption tend to trend towards consumption of lower costs fruit and vegetable servings. Lower income families tend to economize by buying lowercost vegetables and fruit, cheaper cuts of meat and more cereals, added sugars and added fats. Consumption of whole grain, lean meats, fish and fresh vegetables and fruit tend to be associated with income. Drewnowski et al posits that lowincome families struggling to buy food in the face of budgetary constraints would be driven towards more energy dense foods. As such energy dense foods tend to the economists criteria of an inferior good, that satisfy is, a good consumption of which decreases with increasing income. Proposition 4: Lowcost, energydense diets contributetoobesityamongthepoor. This proposition rests on the assumption that obesity
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

is cause by consumption of lowcost, energy dense foods. Economic studies tend to link rising obesity rates to the lower costs of all foods and the increasing costs of physical activity relative to other goods. However, when the analysis is undertake by socioeconomic strata it becomes evident that obesity rates are not equally distributed across all segments of society and diet qualityandcostshowsvariationbysocialclass.In fact, the burden of obesity appears to fall disproportionately on population subgroups with the most limited economic means and groups most at risk for obesity spend the largest proportion of disposable income on food. In the US,whereastheaffluentleanmayspendno more than7%ofincomeonfood,theobesepoorspend in excess of 25%. For the low income families, the only way to meet daily caloric needs might be through the purchase of nutrientpoor, energy denseprocessedfoods. Proposition 5: Rising global food prices could leadtoincreasingglobalobesityrates. Foodpriceshaveexperiencedsignificantincreases in the past few years primarily because of increased in the real price of most agricultural commodities because of the rising price of crude oil and profound volatility in the price of refined grains, vegetable oils and sugars. The view that such price increases would result in a decline in global obesity rates is incorrect. Economic theory suggests that faced with scarcity and rising costs, consumers might well consume more energy dense foods and diets as food prices rise, and not less. Incidentally, the same argument could be made when a tax is placed on energy dense foods todiscourageconsumption. Asthepriceoffoodincreasesinresponsetorising costs of inputs, (or in response to an increase in taxes) economic theory identifies two responses to the price change. First, consumers of the good will tend to shift away from the more expensive product towards less expensive substitutes. An effect referred to as the substitution effect. The

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substitution effectisalwayspositive,meaning that the consumer will always tend to buy less of the good as a result of the price increase. At the same time, the consumer is also faced with less spending power as real income as fallen and would therefore seek to re allocate expenditures just as if actual income had This is called the income effect. The income fallen. effect may be either positive or negative since the price increase may lead to either an increase or decrease in consumption of the good whose price has risen. The fall in real income may actually cause the consumer to reallocateexpenditurefromother goods to purchase the good whose price has in order increased. There appears to be some evidence that energy dense foods are examples of goods for which consumption increases as real income falls among low income groups. In other words, low income families tend to reallocate expenditure from other goods, including higher cost nutrientrich foods, in order to afford the lower cost energydense foods whose prices have risen. In such a scenario, the rising price of energy densefoods,eitherthroughtheimpositionoftaxesor fromgeneralincreasesinthecostofinputsmaynot,in fact, lead to reduced consumption of these foods. In fact, such price increases may have the reverse effect and contribute to lower consumption of quality foods in an effort to afford the lower costs energydense foods. In light of these propositions what are some of the policy options available to Caribbean countries to encourage improvements in the overall quality of the diet and reduce dependence on lowcosts energy densefoods/diets. Encouragement of domestic production of suitable alternatives to imported foods. This can be facilitated by making use of the incentives provided for in international trade agreements, including the domestic support measuresintheAgreementonAgricultureand the programmes of cooperation in trade agreementssuchastheEPA.
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

Reliance on border control measures such as importduties.Whilethenetimpactofataxon food prices may be indeterminate and affects income groups differentially, selective use of these measures can succeed in influencing consumer choice and serve as an incentive to domesticproduction.Notethatunderexisting trade rules the use of import licenses and quantitative restrictions to control import volumes are not acceptable except under extreme circumstances and so they are the exceptionratherthantherule. The impact of trade and economic policies would be most effective when coupled with widespread consumer education and aggressive marketing policies and programmes. Consumer education should extend to the school curriculum at all levels and should also target more vulnerable groups,suchaslowincomefamilies. Incentives to domestic production should not be limited to price incentives. Equally importantareinformation,infrastructuraland institutional support including organization of producersintoviableeconomicenterprises. Promotion of and support to research and development; support to innovation and protection of intellectual property pertaining to food products are important in the policy mix. Special and Differential Treatment Provisions in trade Agreements to mediate the impact of liberalized trade and foreign direct investments on domestic food production and food security. CARICOM has consistently encouraged the exclusion of most agricultural products from tariff liberalization commitments. This, however, needs to be done selectively so as not to deny access to high quality imported products which may not be available locally or which could only be producedatexorbitantcoststoconsumers.

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