June 2016
Global Trade Rules and a (un) Healthy diet: a case study of Mexico’s Sugar
Tax.
S. van der Vliet
University of Amsterdam Master Political Science International Relations Supervisor: Prof. J. Harrod Second Reader: Dr. R. Pistorius
1 TABLE OF CONTENTS 0 LIST OF ABBREVIATIONS 3 FOREWORD 4 CHAPTER 1. INTRODUCTION 5
1.1 INTRODUCTION TO THE TOPIC 5
1.2 SOCIAL AND SCIENTIFIC RELEVANCE 6
1.2.1 Social Relevance 6
1.2.2 Scientific Relevance 7
1.3 METHODOLOGY AND RESEARCH DESIGN 7
1.3.1 Case Selection. Why Mexico? 8
1.4 STRUCTURE OF THE RESEARCH 9
CHAPTER 2. THEORETICAL FRAMEWORK 10
2.1 INTRODUCTION 10
2.2 REGIME THEORY 10
2.3 TRADE REGIME 12
2.4 SUSAN STRANGE CRITICS 13
CHAPTER 3. GLOBAL TRADE RULES AND A (UN) HEALTHY DIET 15
3.1 DEFINING THE GLOBAL (UN)HEALTHY DIET 15
3.1.1 Introduction 15
3.1.2 WHO Guidelines of a Healthy Diet 15
3.1.3 Fat 15
3.1.4 Salt 16
3.1.5. Sugar 17
3.1.6 The Nutrition Transition 18
3.1.7. Conclusion 20
3.2 DEFINING GLOBAL TRADE RULES 21
3.2.1. Introduction 21
3.2.2. Trade agreements and the WTO framework 21
3.2.3 WTO Agreements and Diet 23
3.2.4. Trade related Mechanism regulate healthy food consumption 25 3.2.5. Foreign direct investment Rules AND A Healthy Diet 26 3.2.6. The Global Trade Regime: Health and Diet 27
3.2.7. Conclusion 28
3.3 THE RELATIONSHIP BETWEEN TRADE AND THE GLOBAL DIET. 28
3.3.1. Introduction 28
3.3.2. A conceptual Framework for the Relationship between Trade and Diet 29 3.3.3. Trade Liberalisation and dietAry change; imports and exports 30 3.3.4. Trade liberalisation and dietary change: foreign direct investment 31
3.3.5. Harmonisation of Regulations 33
3.3.6. Conclusion 34
3.4 TRADE IN AGRICULTURAL PRODUCTS: SUGAR 35
3.5 BUSSINESS ACTIVITY 37
3.5.1 Introduction 37
3.5.2. Transnational Food Cooperations 37
3.5.3. The Sugar Industry 38
3.5.4. Conclusion 40
CHAPTER 4. POLICY OPTIONS FOR A HEALTHIER DIET 41
4.1. THE INSTITUTIONAL ANGLE ON THE TOPIC 41
4.1.1. Introduction 41
4.1.2 THE WHO 41
4.1.3. The WTO 43
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4.1.5 Conclusion 45
4.2. OVERVIEW OF POLICY OPTIONS ESTABLISHED ALREADY 45
4.2.1. Introduction 45
4.2.2. Taxing (un)healthy products 45
4.2.3. Reducing total added sugar, salt or fat in consumption products 46
4.2.4. Conclusion 46
CHAPTER 5. CASE STUDY: MEXICO’S SUGAR TAX 48
5.1 DESCRIBING THE SITUATION 48
5.1.1 Introduction 48
5.1.2. Mexico’s General Country Profile 48
5.1.3. The Mexican Diet 49
5.1.4. Mexico’s Health Status 53
5.1.5. Mexico’s Sugar profile 54
5.1.6 Conclusion 56
5.2 THE MEXICAN SUGAR TAX 57
5.2.1. Introduction 57
5.2.2. How is the Tax designed 57
5.2.3 Mexican Government 60
5.2.4. Civil Society Organisations 60
5.2.5 The soft drink industry 61
5.2.6 Conclusion 61
5.3 MEXICO’S TRADE REGIME 62
5.3.1. Introduction 62
5.3.2. WTO 62
5.3.3. The NAFTA 62
5.3.4. Previous events: U.S.- Mexican trade relations 65 5.3.5. Foreign Direct Investment; developments and Rules 69
5.3.6. Mexico’s Trade Regime in the Issue area 71
5.3.7. Conclusion 72 CHAPTER 6. CONCLUSION 74 BIBLIOGRAPHY 78 Interviews 78 Primary sources 78 Secondary Sources 80 Websites 86 APPENDIX 90
3 LIST OF ABBREVIATIONS
BIT Bilateral Investment Treaty
BMI Body Mass Index
DSU Dispute Settlement Understanding
EU European Union
FAO Food and Agriculture Organisation
FDI Foreign Direct Investment
GATS General Agreement on Trade and Services
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GI’s Geographical Indications
HFCS Highly Fructose Corn Syrup
IEPS Impuesto Especial Sobre Produccion y Servicio
Special Tax on Production and Services
IIA International Investment Agreement
MFN Most Favoured Nation
NAFTA North Atlantic Free Trade Agreement
NCD Non-Communicable Diseases
OECD Organisation for Economic Cooperation and
Development
PAHO Pan American Health Organisation
SPS Sanitary and Phytosanitary Measures
TFA Trans Fatty Acids
TFC Transnational Food Cooperation
TRIPS Trade Related International Property Rights
TRQ Tariff Rate Quota
UN United Nations
UNCTAD United Nations Conference on Trade and
Development
URAA Uruguay Round Agreement on Agriculture
US United States
USDA United States Department of Agriculture
WHO World Health Organisation
4 FOREWORD
My personal motivation for researching the topic of a healthier diet is because it is mostly in line with my personal interest. The reason why I chose sugar in the case study is because the
consumption of sugar is the major reason why people are overweight or suffer from diabetes and cardiovascular diseases (WHO, 2004). My personal opinion is that a big part of the things we do or choose in our daily lives, such as eating, are formed or constructed by what others want us to do. In my opinion, this research cannot only be an example for other products, which can cause obesity or NCD, such as fats or salt. But can also be a good example how trade rules and certain products, industries, governments or institutions influence the way we design our lives and produce policies for the collective (For example the consumption of Alcohol, Tobacco, Animal Products etc.).
5 CHAPTER 1. INTRODUCTION
1.1 INTRODUCTION TO THE TOPIC
Food is one of the basic human needs. Health is the greatest gift of human kind. Nonetheless, food and health do not always go hand in hand. For the first time in history, more people are overweight than undernourished and therefore, obesity is expected to cause a bigger health disaster for humanity than undernourishment (Bichler & Nitzan, 2016:2). Our diet is of great importance for our health and if food is not consumed wisely it may h ave disastrous
consequences. A high intake of fat, salt and sugar can cause numerous diseases with death as a consequence. These diseases are called ‘’non-communicable’’ diseases (NCD) or “lifestyle” diseases and are among others:
o Obesity o Diabetes o Hypertension o Heart disease o Cancer (Hawkes et al., 2010:8)
To prevent such diseases a global strategy is needed (WHO, 2004). However, important economic factors such as trade cannot be neglected. Hawkes at al. (2010) argues that there is a distinctive relationship between trade liberalisation and the global (un) healthy diet. It is commonly known that certain products in a high intake can be very harmful to your health. Trade liberalisation facilitated a shift towards a diet where these products are overconsumed. In a majority of the cases, this new diet consists out of more highly processed foods, which contain more sugar, fat and salt (Hawkes et al., 2010).
Figure 3.4 shows the conceptual framework for this relationship. When trade
liberalisation opens markets this could cause a cycle of economic growth. It could raise income, increase agricultural productivity and lowers prices. Lower prices mainly benefit the poor, because they spend relatively most of their income on food. If food becomes less expensive the relative price for energy will be lowered (Rayner et al., 2007: 68). In 2002 the World Trade Organisation (WTO) and the World Health Organisation (WHO) joined forces to write a report about the health implications of trade. In this report, they stated that trade agreements should take into account public health, by permitting national governments to take trade restrictive measurements when protecting public health. Nonetheless, the report mentioned intellectual
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property rights, food safety, security and transmittable diseases via food but did not address the effect of trade agreements on changing diets (Rayner et al., 2007: 69).
So if we know that a certain trade climate has given an incentive for a change in our diet, to what extent will this trade climate be a barrier in the transition towards a healthier diet? The central question in this research, therefore will be:
How do global trade rules restrain global attempts to a healthier diet?
Since this thesis will focus on the political area of this topic there will be examined in the extent to which global or national governments are able to implement policy implications to combat unhealthy diet habits.
When it comes to policy options for governments to discourage the consumption of too much sugar, fat and salt these can vary from the restriction of food marketing, effective food labelling, and national dietary guidelines to price mechanisms such as subsidies and taxes (Cannon, 2004: 372). Nonetheless, the WHO calls a sugar tax, together with subsidising
vegetables and fruits, the most effective instrument to combat obesity (Nestle, 2015: 824). For this reason, sugar and the sugar tax will be the main subject of this research. The case selection will be further explained in the methodology section.
1.2 SOCIAL AND SCIENTIFIC RELEVANCE
1.2.1 SOCIAL RELEVANCE
The social relevance of this research lies in the global prevalence of NCD’s, which is mostly caused by lifestyle and nutrition. Figure A.6,7,8,9 show the prevalence and mortality of diabetes, cardiovascular diseases, and obesity. In 2004 the WHO launched their Global Strategy on Diet, Physical Activity and Health and recognised the growing global burden of NCD’s (WHO, 2004:1). These diseases count for 60% of the global amounts of deaths every year. Moreover, these diseases are no more only prevalent in the developed world but are also a major cause of death in the developing world (WHO, 2004). Although, NCD are often seen as “life-style” diseases, caused by “western-lifestyles”, seven of the ten countries with the highest diabetes rate are in the global south (Yach, et all, 2006:63). As seen in figure A.6,7,8,9 the mortality of these diseases is, due to a lower quality of health care, in this part of the world even bigger. Not only the
consequences of NCD are more radical in developing countries, also economic costs and health system funding is graver in these areas. For example, Mexico’s total costs for diabetes in 2000 were 2,6% of the country’s gross domestic product (GDP) (Yach, et all, 2006: 63). This makes obesity and NCD as much an economic as a health issue (Yach et all, 2006:63).
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1.2.2 SCIENTIFIC RELEVANCE
The relationship between trade and public health has often been studied. Researchers
conducted studies of how international trade liberalisation caused or fuelled the consumption of products, which are ought to be bad for your health. Direct or indirect influences were
recognised. In the literature, the shift towards a different diet has been conceptualised as the nutrition transition1.
This has not only been done in the relationship with food (Hawkes et al., 2010) (Rayner et al., 2007), but also in the relationship between alcoholic beverages or tobacco (Labonté et al, 2011). The scientific relevance of this research lies in the fact that most of these researchers tried to prove or provide a framework on how globalisation, global trade or trade liberalisation triggered nutritional transitions towards a more unhealthy diet. For this reason, the research question on how global trade rules could possibly prevent the shift towards a healthier diet is very relevant.
Although the relationship between trade and the transition towards a healthy diet has not been researched yet, the role of private entities in this problem has been covered. Nestle (2013) has done multiple types of research in how the food industry influenced policies in the United States (Nestle, 2002). Cannon (2004) researched how the sugar industry, also named ‘big sugar’, influenced the content of the WHO global strategy on diet and health (Cannon, 2004: 378). Jahiel & Babor (2007) argue that corporate activity can drive an epidemic such as food addiction and obesity, by for example targeted marketing (Jahiel & Babor, 2007: 102). 1.3 METHODOLOGY AND RESEARCH DESIGN
This research will have a qualitative research design with multiple sources. The method for this research will be the conduction of a case study. There has been chosen for a country, which has taken action towards the consumption of an unhealthy product in the form of a tax. In this case, the in 2014 established sugar tax in Mexico. My data will be gained from the following sources:
o Primary research sources: official documents from the WTO, WHO, government documents, European Union, and official statements from the sector/industry.
Interviewing people from the public sector and numeric date from the WTO, FAO, WHO, USDA, U.N. and the World Bank
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Human history has been characterized by changes in diet and nutrition. Over the last three centuries the
pace of change has occurred more rapidly than the first million years of our existence. The theory of nutrition transition posits that the stages in this change are dependent on agriculture, health and socioeconomic factors (Popkin, 1998:6)8
o Secondary research sources: more overall research on the relationship between trade and diet. Or the relationship between trade and other unhealthy products (Alcohol, Tabaco).
1.3.1 CASE SELECTION. WHY MEXICO?
This research will examine the in 2014 established sugar tax in Mexico. Below will be explained why Mexico has been chosen for this thesis. In the first place, Figure A. 6 already showed Mexico’s high diabetic mortality rate. Research done by the International Diabetes Federation has shown that Mexico has the highest diabetes rate in the world (Website Diabetes federation) Moreover, The prevalence and death rate of NCD’s is extremely high in Mexico (See figure 1.1) (Rtveladze, 2012: 233). From the total amount of deaths in Mexico, 77% is caused by NCD’s (Website WHOa). In the second place, as shown in figure 1.2 Mexico has a very high caloric consumer intake. Which shows that the Mexicans do eat more than other populations. Thirdly, the Mexican population has a special connection with sugar-sweetened beverages. For instance, soft drinks are seen as magical products and are used in religious rituals (Nestle, 2015:816). In addition, Mexico does have a big cane sugar industry, which is a sizable employer. This makes the sugar industry an important part of the Mexican society (Kornis, 2006). Finally, the Mexican government established a sugar tax in January 2014. In detail, Mexico’s sugar tax is actually a tax on sugar-sweetened beverages such as soda’s and snacks that contain more than a certain amount of calories. What makes the case of Mexico more interesting is the fact that, Mexico did have a ‘sugar tax’ history, which debauched in a trade dispute with the United States. In 2002 the Mexican government put a tax on sugar-sweetened beverages made with Highly Fructose Corn Syrup (HFCS). HFCS is mainly produced in the United States. After the dispute settlement, the two countries came to an agreement and decided to remove all trade barriers towards sugar and other sweeteners. It is still unclear how their current sugar tax fits into this framework. This makes Mexico the best suitable case to examine if global trade rules could restrain the transition towards a healthier diet.
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Generalised to other countries and products Applied to Mexico's sugar tax
Case
Possible trade restraints in a global solution Causal relationship with trade
developments Central Problem: Unhealthy
diet Figure 1.2 Consumer Calorie Intake by Country and Category
Source: Website Euro monitor 1.4 STRUCTURE OF THE RESEARCH
To answer the central question the following structure will be used. An introduction to the topic has already been given. Chapter 2 will explain the theoretical framework. Chapter 3 will start with some scene setting and definitions of the important concepts in the research question (healthy diet and trade rules). After, the relationship between trade and diet will be further explained and examined against some current developments. Chapter 4 will provide an overview of policy options presented by global governance. Finally, the Mexican case will be examined and on the basis of these findings the research question will be answered.
10 CHAPTER 2. THEORETICAL FRAMEWORK
2.1 INTRODUCTION
For the purposes of this thesis adapted regime theory will be used as the theoretical framework. Regime theory was introduced by Stephen Krasner (1983). In his book, he introduces regime theory and let other writers apply the theory towards an important topic in the political
economy. To understand how global trade rules could restrain policy options for a healthier diet it will be important to see the principles behind global trade rules as the trade regime. For this reason, Krasner’s (1983) will be used. Next to this, Lipson (1983) applied Krasner’s regime towards a trade regime. His work will be used to clarify how a trade regime has put influences on for example trade flows and trade policies. Finally, in this issue, corporate power cannot be neglected. Multinational cooperations mostly sell these potentially unhealthy products to consumers and have, therefore, a commercial interest in the problem. Hence, Susan Strange’s (1983) critics are used to incorporate these actors in Krasners (1983) theoretical framework. 2.2 REGIME THEORY
In this research, adapted regime theory will be used. Krasner (1983) defines international regimes as following:
“a set of principles, norms, rules and decision-making procedures around which actor expectations converge in a given issue-area”(Krasner, 1983:2).
Regimes are in this framework the intervening variables between basic causal factors such as power, interest and values and the outcome in the form of actor behaviour. Figure 2.1 shows this causality. He argues that principles and norms can be seen as the basic characteristics of the regime. This means that a change in principles or norms will mean a change of the regime itself, whereas a change in the rules or decision-making procedures can be seen as a change within the regime (Krasner, 1983:3). Krasner (1983) defines principles as beliefs or facts and norms as standards of behaviour in terms of fights and obligation (Krasner, 1983:2). Next to this, rules are defined as specific prescriptions for actions. Decision-making can be seen as the practices for making and implementing collective choice (Krasner, 1983:2).
An important distinction must be made between arrangements and regimes. Arrangements are one-shot Ad hoc agreements and the regime is the environment that facilitates these arrangements (Krasner 1983:3). When talking about international trade, the
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implementation of a trade agreement means a change within the regime, because solely rules of decision-making procedures will be adjusted.
Figure 2.1 Regime Theory
Source: (Krasner, 1983)
Krasner (1983) distinguished five basic causal variables that can facilitate the
development of a regime. At first, he mentioned the egoistic self-interest of the nation state. By this, he means that one party does always want to maximise its own utility and, therefore, does not include the utility of another party (Krasner, 1983:12). Secondly, he argues that political power is a major variable in explaining regime development. According to Krasner (1983), political power can be divided in power for the service of the common good and power in the service of particular interest. Firstly, power in the service of the common good is represented by a long tradition of classical and neoclassical economics and their theories about the provision of public good (Krasner, 1983:13). The state must use its political power to stand in service of the common good and provide institutions that secure it (Krasner, 183:14). Secondly, Krasner (1983) divides power in the service of a particular interest. This kind of power is used for the utility of particular actors, according to Krasner (1983), usually states. Hereby, power can be used to serve just individual and not joint payoffs or powerful actors are able to change the strategies that are used by others (Krasner, 1983:15). In this research both sources of power will be present.
Also, norms and principles can be described, as basic causal variables in regime development. These norms and principles can influence the regime in a certain issue area. Nonetheless, norms that are not necessary related to the specific issue can still influence the regime. The final three variables are usage, custom, and knowledge (Krasner, 1983:18). These three cannot define a regime on their own, but can facilitate routinized behaviour and create a common ground (Krasner 1983: 19). Krasner’s regime theory is delimited towards the nation-state as most important actor. For the purpose of this research, it will not be possible to ignore the power that may be imposed by non-state actors. Krasner’s regime theory will, therefore, be insufficient to use as the only theoretical framework. Hence, Susan Strange’s critics on Krasner will be used, as an addition to include multinational cooperation’s, industries or civil society
Basic Causal
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organisations. For this reason, the term adapted regime theory will be more suitable when referring to the theoretical framework. In the next subchapter, the dynamics of a trade regime will be explained.
2.3 TRADE REGIME
As described above, regimes can be analysed as an outcome from different principles, norms, rules or procedures, or can be seen as a social institution, which stands between economic and political intercourse. Logically, these two perspectives will have a different scope of research. For example, a trade regime as a dependent variable could raise questions linked to the formation or development of a certain regime, whereas a trade regime as an independent variable must be researched in the scope of its impact on behaviour (Lipson, 1983:234). Since this thesis will be answering the question on how global trade rules prevent a healthier diet, it will be useful to examine what the impact of an existing trade regime may be on health policies. According to Lipson (1983), this answer must be searched on two levels
1. The Regimes impact on national trade policies 2. Its impact on trade flows (Lipson, 1983:262)
The first point, the Regimes impact on national trade policies will be examined in Chapter 5, were the national policies for supporting a healthy diet in Mexico will be researched. The second point, the regimes impact on trade flows will be explained in Chapter 3. This chapter will show the consequences of the current trade regime on global trade flows, and how these flows contributed to the transition of our diet.
National policies are designed in a context that is formed by the ongoing regime. Multilateral arrangements and institutions may constrain the policy process but may also provide new opportunities and sources of support for policy makers on the national level. It is for that reason that the regime can influence the choice of national policies (Lipson, 1983:262). In the case of policies for a healthier diet, we may speak of a certain issue- regime. Were the regime mediates between basic causal variables and the related behaviour outcome. In this case, an examination of how this issue-regime around a healthier diet was formed will be needed. Besides, the analyses must be completed with a description of the regime as intervening variable.
Moreover, if the presence of a trade regime affects commercial law and policy making, it will also affect actual commerce. The competitiveness of traded goods will be affected by the size of trade barriers. Over the long run those barriers influence the location and composition of production (Lipson, 1983:265). For this reason, the thesis will not be substantive if the role of
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commerce is ignored and the analyses purely focus on state policies. Therefore, to complete this theoretical framework the critics of Susan Strange on Krasner’s regime theory will be added. 2.4 SUSAN STRANGE CRITICS
Susan Strange refuses Krasner’s (1983) regime theory as a misleading concept that obscures economic and power relationships (Krasner, 1983:1). In Susan Strange chapter in Krasner’s “International Regimes” she expresses five objectives towards his theoretical framework. In the first objective, she argues that regime theory is formed too much out of an American scope of research. Secondly, she mentioned the case of imprecision: the concept is that broad that it can be used in any kind of power distribution when influencing outcomes (Strange, 1983:339). Thirdly, regime theory can be value biassed, where certain things cannot be taken for granted. In the fourth place, Regime theory may have too much of a static view. This means that a regime can exaggerate the static quality of arrangements for managing the international system. She mentioned the example of international trade, where trade arrangements are changeable and less uniform than Krasner argues. According to Strange (1983), the trade regime is neither constant nor continuous over time, both between partners and between sectors (Strange, 1983:348). The final objective is the prevalence of state-centeredness’ in Krasner’s Regime Theory. The fact that governments discuss via international organisations does not always mean they come to well-founded decisions. According to Strange, Krasner’s Regime theory overvalues the positive and undervalues the negative of international cooperation (Strange, 1983:349).
What underlies Strange’s critics is her view on how the international system has changed. She argues that the nature of competition between states is fundamentally different. Where states used to compete over territory and its accompanying resources, they
contemporary compete for market share in the world economy. This automatically changed their nature and behaviour, which will make industrial and trade policy more important than defence and foreign policy. When searching for economic allies, states will be looking for other states, but so do will do foreign- owned firms (Strange, 1995: 1). Finally, the state must increasingly share its authority in the economy and society with other entities. By this means, not only transnational companies, but also non-governmental organisations or international institutions (Strange, 1995:1).
In “The Nature of International Political Economy” Strange (1994) explains how
technological transitions created the internationalisation of production. This has caused a more rapid change in the relative wealth of national economies and, therefore affects the stability of national policies and governments (Strange, 1994:210). Moreover, this has moved production for the national market, towards production for the multinational market (Strange, 1995:2). As a
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consequence firms have a lot more political entities to negotiate with. On the other hand, the multinational market establishes beneficial incidentals, such as employment and technology, for national economies (Strange, 1995:2). For this reason, firms can become an important part of interstate competition and make governments want to change rules or regulations to attract them (Strange, 1995:3). Global problems such as the degradation of our environment or public health issues cannot longer be solved within the state system. Contemporary, these problems need to be solved in the international political system, where authority is widely dispersed and not always very obvious (Strange, 1994:214). The more the world gets integrated the bigger the problems of economic management on the nation-state level will be (Strange, 1994:217). But how can this all be applied towards the issue presented in this thesis? The alternative for Krasner’s Regime Theory given by Strange (1983) will be added to answer the research question. Strange (1983) states that transnational transactions have become very important and therefore it is needed to look at three different characteristics of these transactions:
1. Bargaining partners often settle a very different kind of power. For example one has the political power to refuse access to the market, the other has the power to refuse a transfer of technology.
2. Each of the bargaining partners is vulnerable to a different kind of risk (corporate take-over).
3. The bargain struck is a highly variable mix of political and economic benefits (Strange, 1983:353).
The above-mentioned bias in Krasner’s (1983) Regime Theory can be corrected by attention for the basic structures of the international political economy, which are respectively, security, welfare, money, production, trade and knowledge (Strange,1982). For the purposes of this thesis, it is necessary to not only look at bargaining between states but also take into account cooperate enterprises (Strange, 1994:211).
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CHAPTER 3. GLOBAL TRADE RULES AND A (UN) HEALTHY DIET 3.1 DEFINING THE GLOBAL (UN)HEALTHY DIET
3.1.1 INTRODUCTION
To answer the research question it is important to examine how the global diet is designed and to what extent this can be qualified as ‘unhealthy’. Therefore, we first need to distinguish a ‘healthy diet’ and an ‘unhealthy’ diet. This will be done on the basis of WHO guidelines. Next, the three products, which are considered to be most harmful to your health, will be explained (Sugar, Fat, and Salt). For this thesis, it is important to elaborate on the main characteristics of these products, because these characteristics will be important when they are traded. Finally, there will be explained how nutrition has changed over time and which social, economic and geographical factors have caused this.
3.1.2 WHO GUIDELINES OF A HEALTHY DIET
The WHO states that although the characteristics of a healthy diet are dependent on gender, lifestyle and physical activity there are some general guidelines about what a healthy diet must, or must not contain:
o At least 400 grammes of fruit and vegetables a day
o Less than 10% of the total energy intake from free sugars. However, ideally, an adult should consume not more than 5% a day
o Less than 30% of the total energy intake from fat, where unsaturated fats are preferred above saturated fat and industrial trans fats
o Less than 5 grammes of salt a day (Website, WHOb)
When a diet does not contain enough fruits and vegetables and is high in energy, free sugars, fat, and salt it can be described as ‘unhealthy’. Figure A.1,2,3 are showing the global diet and the diets consumed in Europe, Northern America, and Central America. When comparing these results with the guidelines from the WHO there can be concluded that only in the European diet sugars are not over consumed. For the purposes of this thesis, below the main characteristics of the most harmful products, fat, salt and sugar will be explained.
3.1.3 FAT
One could differentiate between three types of fat: unsaturated fats, saturated fats and trans fatty acids (TFA’s). This last type is created in an industrial process where vegetable oils are processed to make them more solid. In this process, the oils are exposed to heat, which can make the product toxic and, when consumed, increases the risk for diabetes. The three kinds of fats
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are explained in table 3.1. It is important to state that, the WHO has urged for the removal of trans fatty acids and a reduction of saturated fat from the global food supply (Website, WHOc). Table 3.1. The ‘fat’ overview.
Fats Products Bad for your health?
Unsaturated Fats Fat fish, Avocados, Olives, Vegetable oils
No
Saturated Fats Animal products such as Milk, Cheese and Meat
Yes, when over consumed
Trans Fatty Acids (TFA’s) Processed foods such as Pastries, Pizza, Cookies etc.
Yes, when exceeding the consumption of more than 10% of the total energy intake Source: Website American Heart Organisation, Website WHO
To reduce the risks of TFA’s countries could implement on the one hand regulatory policies, which prohibit the use of these products in the production chain. On the other hand,
governments could cooperate with the private sector for a reduction of the use of this product on a voluntary basis. The WHO argues that the most effective way in reducing these TFA’s in the total consumption is with legislative prohibitive measurements for the sale of TFA’s. This has already been established in Austria, Denmark, Iceland, and Switzerland. This is in contrast to the voluntary reduction programs of other countries which have been not been proven to be
effective (Website, WHOc)
3.1.4 SALT
The consumption of salt has an important influence on our health status. In most cases is the quantity we consume on a regular daily basis far beyond what is necessary for staying healthy. People require less than 1 gramme of salt for a daily healthy consumption. However, this daily consumption lies between the 9 and 12 grammes of salt a day. Worldwide countries committed toward salt reduction programs when the WHO recommended salt reduction as the top three priority in defeating NCD’s (Hashem, Pombo-Rodrigues, and Capewell, 2015:7). At the World Health Assembly in 2013, all the WHO member-states signed to reduce salt intake by 30% in 2025. As a result, most countries did establish programmes where they encouraged the industry to reduce the salt levels in their products. However, most of these programmes are still
voluntary. A few countries did introduce legislation for the amounts of salt added in bread. Even so, only South-Africa and Argentina have taken a legislative measurement to reduce salt in a wide range of products (Webster et al. 2014).
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3.1.5. SUGAR
The excessive consumption of sugar is, together with fat and salt, a major factor in causing overweight and obesity (World Cancer Research Fund International,2015:2). Nonetheless, sugar is not an easy product to define. Sugar can be found in two different ways in our diet; naturally occurring or added. Table 3.2 explains which products can be defined as sugar.
Table: 3.2. Types of Sugar explained
Sugar Type Name Can be found in Sweetness* Comment
Naturally Occurring
Fructose Fruits and Vegetables, honey 1.3 According to nutritionist healthy to consume in its original form. But can also be used as
sweeteners and therefore added Lactose Dairy products 0.2-0.3
Added Sugars (are added during processing)
Sucrose White table sugar (Naturally found in sugar cane and sugar beet)
1.0
Corn Syrup Made from corn 100% glucose 0.56 High Fructose Corn Syrup Mixture of glucose (45%) and fructose (55%) Glucose/ Dextrose Is produced when sugars are digested or metabolised
0.56 Main source of
energy for the body
*the sweetness scale is the relative sweetness towards sucrose with a sweetness score of 1.0. Source: Compiled by the author (Parker et al., 2010:74), (Website Food Insight) (World Cancer Research Fund, 2015;2)
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For the purposes of the rest of the research, it is necessary to highlight the sugar that comes from Highly Fructose Corn Syrup (HFCS). A chemical process makes HFCS from corn starch. HFCS can be called a carbohydrate sweetener and it is praised for its sweetness. In other words, it will enhance the taste of various food products (Parker, 2010: 71). HFCS 42% means that the product contains 42% fructose. This kind of HFCS is mostly used in beverages,
processed foods, cereals and baked goods. On the other hand, HFCS 55%, meaning 55% fructose, is mostly used in the soft drink industry (Website, USDAa). It is important to make clear that these sweetening products are recognised both by the body, as the industry as sugar. However, some have argued that the effects of HFCS on the human body are different from the effects of cane and beet sugar. In the last 10 years, several medical studies have been published, which argue that there is an existing correlation between the consumption of HFCS and the prevalence of obesity and cardiovascular diseases (Malik et al, 2015:1616). On the other hand, some studies have argued that there is no reason for assuming that HFCS can be more associated with obesity, than other sweeteners or sugar. However, also Carriedo (2016) argued that HFCS has other metabolic effects on the human body. And therefore a problem can arise when high amounts of this fructose (HFCS) are consumed (Parker et al. 2010: 75). Moreover, Goran et. al. (2013) showed in their research the existing correlation between the consumption of HFCS and the prevalence of diabetes per country (Goran et al., 2013: 57).
As stated above the WHO urges for a sugar consumption of less than 10% of the total energy intake. A further reduction of below the 5% is ought to have extra health benefits (Website WHOd). For this reason, the WHO proposes a reduction of added sugar in foods and non-alcoholic beverages (WHO,2013 :33). As seen in the figures A. 1,2,3 many populations exceed the WHO sugar guidelines. Almost three-quarters of global sugar consumption is taking place in the developing world since the cheap and abundant supply of sugar on the world market (World Cancer Research Fund, 2010: 3). This thesis shall examine the relationship between the prevalence of NCD’s and trade. Because of the complex composition of the product sugar and contribution the product has for the global obesity epidemic, it will be subject for this thesis. In the conclusion, generalisations will be made concerning the other products.
3.1.6 THE NUTRITION TRANSITION
Figure 3.1 shows the development of the average dietary energy supply adequacy by region. As shown in this figure there is a growth in the total dietary energy supply, especially in Latin- America and Africa.
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Figure 3.1 Average dietary energy supply adequacy, 3-year averages (1990 to 2015)
Source: (FAO, 2015)
Economic factors have far more influence on our eating habits than other factors. For example, changes in income, patterns of work, leisure activities and different roles for women can cause a shift in dietary and physical activity patterns (Drewnowski &Popkin, 1997: 10). We can divide five economic and social trends, which have changed the total calorie intake (i) expanding labour market opportunities for women, (ii) increased consumption of food not prepared at home, (iii) rising costs of healthy foods compared with unhealthy foods, (iv) growing quantity of caloric intake with a declining food price and (v) decreased requirement of physical activity (Yach et all. 2006: 62). Next to this, nutritional transitions go hand in hand with demographic changes such as higher life expectancy and fertility rates. When the global diet changes from high in fibre and complex carbohydrates towards high in fat and sugars this will cause a higher prevalence of NCD’s and obesity (Drewnowski & Popkin, 1997: 31).
Generally, economic and social changes do also form a gap between dietary patterns in developed and less developed countries. Whereas Western countries in North- America and Europe try to promote a simple diet with grains, vegetables, and fruits, developing countries use their growing income to replace their traditional diets with a diet high in fat and caloric
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areas have been recognised, where urban consumption patterns are often more unhealthy. Firstly, urban areas have better transportation and marketing networks, which create more food availability. Secondly, commercial food brands have more marketization opportunities, which cause a bigger influence in the city. Thirdly, urban areas have a different kind of job occupation or household structures and therefore, there is less time to cook at home. Finally, urban areas have other compositions of diseases and health services (Popkin, 1998: 8). Although, these urban-rural differences are also identified in the developed world they are more significant in lower-income countries (Popkin, 1998:8).
The last factor that cannot be ignored when studying nutritional transitions is the natural preference of human beings for foods that contain high amounts of fat and sugar. It has been proven that in human childhood there is a natural need for foods high in energy and sweetness. Hence, sweet preferences are observed all around the globe. All human societies do appreciate sugar and fat in their food consumption (Drewnowski & Popkin, 1997: 40) However, this cannot be used as the main explanation for nutritional transitions. Overall, there is more consensus in the scientific society that the excessive consumption of fat and sugar is mainly caused because by their availability in the food supply chain (Drewnowski & Popkin., 1997: 40).
3.1.7. CONCLUSION
There now has been defined what dietary patterns can be seen as unhealthy, and what one must not consume to eat healthier. Not only are the three most unhealthy products explained, but also their processed sister products, such as HFCS and TFA. These processed products are mostly used in snacks and sugar-sweetened beverages. Besides, Popkin (1997) describes how economic and social indicators underlie nutritional transitions. When processed foods with a high amount of fat, sugar and salt are more available in the supply chain, it is more likely they will be overconsumed.
21 3.2 DEFINING GLOBAL TRADE RULES
3.2.1. INTRODUCTION
To answer the central research question it is also important to be clear about what is meant with “global trade rules”. This will be defined in this subchapter. Firstly, the framework under which the WTO operates will be explained. Secondly, the special trade agreements, which are related to health, will be explained. Thirdly, this subchapter will provide the trade-related mechanisms in promoting a healthy diet. Finally, rules concerning Foreign Direct Investment (FDI) will be explained.
To apply the theoretical framework towards the research, it is very important to find out which norms and principles are situated in the global trade regime. For this reason, the norms and principles that are underlying the trade rules of the WTO are indispensable in defining the regime. Moreover, in answering the research question it is even more important to understand which trade rules exist and what their particular conditions are.
3.2.2. TRADE AGREEMENTS AND THE WTO FRAMEWORK
As the world has become more interdependent, the influence of international trade on national economies has been growing (Jackson, 1989 :2). International economic institutions have in this development, whether or not symbolic, a central role. For the purposes of this thesis, “global trade rules” will denominate both trade and investment agreements. For this reason, we firstly need to define the concept of a trade agreement:
“A trade agreement is a negotiated agreement among two or more countries to limit or alter their policies with respect to trade” (Thow, 2010: 307)
Trade agreements can be distinguished in bilateral, multilateral and regional trade agreements. Bilateral trade agreements are international trade agreement between just two countries. Since 2003 countries are increasingly involved in bilateral trade agreements. As a matter of fact, these agreements do often have far more restrictive conditions than WTO agreements (Thow,
2010:307). Multilateral agreements are international trade agreements that involve the
participation of a large group of countries, each with their own schedule of commitments. In this case, the WTO is used as the official forum (Thow, 2010: 307). Regional trade agreements can be described as an international trade agreement between countries in a specific region. Similar to multi-lateral trade agreement each party has got their own schedule of commitment. Examples of regional trade agreements are the European Union (EU) or the North American Free Trade Agreement (NAFTA). For this research, these three forms agreements will all be counted as global trade rules. The analyses will therefore not only be focussed on general rules of the WTO.
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To understand the institutional framework of the WTO we need to understand how and why this institution has been founded. When in 1944 the Bretton Woods conference invented the World Bank and the IMF, there was the attempt to invent a similar organisation for trade. A few years later this resulted in the establishment of the General Agreement on Tariffs and Trade (GATT). Owing to this, from the 1960’s there was a prevailing consensus of liberalising trade for the purposes of economic growth and prosperity. In spreading this message, these institutions played a central role (Jackson, 1989 :2). After the Uruguay round negotiations in 1994, the GATT was replaced for the WTO, which made the GATT one of the WTO agreements (Thow, 2010:302). However, the GATT still counts as the umbrella treaty for the trade in goods and although the treaty was updated in 1994 the essential core of the agreement remained similar as when it was invented (Website WTOa). The basic rules of the GATT are summarised below.
1. The central obligation is the tariff “concession” to limit the level of tariffs for other GATT contracting parties (Jackson, 1989:40).
2. The second equally central obligation is that of the Most favoured Nation (MFN) (Jackson, 1989:40). This means that one cannot discriminate between one’s trading partner.
3. The third central obligation is the “Code of Conduct” for government behaviour in regulation international trade. The code applies to all goods; both imported and exported, although most of the rules are relevant only to imports (Jackson, 1989:40). Figure 3.2 shows the framework of how the WTO is organised. Altogether, the broad principles for the trade of goods set out in the GATT. The General Agreement on Trade and Services (GATS) does this for services. Apart from this, there exist agreements and annexes that are dealing with extra requirements, sectors or issues.
23 Figure 3.2 institutional framework of the WTO
Umbrella Agreement Establishing WTO
Goods Services Intellectual property
Basic Principles GATT GATS TRIPS
Additional Details Other goods agreements and annexes Services Annexes Market access commitments Counties ‘schedules of commitments Countries ‘schedules of commitments (and MFN exemptions) Dispute Settlement Dispute Settlement
Transparency Trade policy reviews
Source: Website WTOb
Since bilateral or regional agreements may contain other commitments than the general WTO rules, the agreements and their conditions that are relevant for the case study will be explained in Chapter 5.
3.2.3 WTO AGREEMENTS AND DIET
For obesity and NCD’s prevention, the most relevant trade rules are situated under the GATT and the technical agreement on tariffs and trade (TBT). However, the agreement on services, subsidies, intellectual property rights and other agreement will also be relevant. All multilateral trade agreements that are relevant to the trade of food and agricultural products will be
explained below.
Under the GATT all measurements that may affect products in the global trading system must be in line with two basic principles:
1. The “most favoured nation (MFN)” obligation in article 1; this article obliged that states must give an equal treatment towards similar or competing products from all other member states.
2. The “national treatment (NT) “ obligation in article 3; obliged all member states to treat foreign products as favourable as local products in their regulations and internal taxes (Tigerstrom, 2012: 183).
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The Agreement on Technical Barriers to trade (TBT agreement) states that national mandatory regulations, voluntary standards and conformity assessment procedures from member states will not form any obstacle to trade (Hawkes et al., 2010:19). A technical regulation can be defined as a document that lays down product characteristics on their related processes and production methods (Tigerstrom, 2012:184). For example, packaging, marking or labelling would all fall within the definition of technical regulations. Here are two obligations in the TBT agreement, which can form a problem with obesity and NCD’s prevention:
1. The non-discrimination obligation
2. Obligation to use “least trade- restrictive” measures.
Next to these two points, in the TBT agreement member states are obliged, when they exist, to use international standards, be transparent and have to share their information for technical regulation and for non-binding standards (Tigerstrom, 2012:184). However, the TBT agreement refers to technical regulations and was not designed to deal with health issues (Josling, 2008: 4).
As seen in Figure 3.1 the Trade Related Intellectual Property Rights agreement (TRIPS) deals with the minimum standards of intellectual property rights. Some important aspects of agricultural, food production and marketing were included in the TRIPS. For agriculture, these property rights were mainly the patents for biotechnology, plant breeders rights and the protection of Geographical Indications (GI’s). These geographical indications prevent parties from pretending the good to originate from a certain geographical area other than the area that the product originally comes from. These principles must prevent the public from being misled and must make sure that there is no case for an act of unfair competition (Example:
Champagne) (Josling, 2008:6).
The GATT included many exceptions on agricultural trade. The Uruguay Round Agreement on Agriculture (URAA) corrected a lot of these exceptions. The URAA provides obligations, which prevent governments from undermining the trade system.
o The prohibition of export subsidies, other than those that are specified; o Prohibition on domestic subsidies, which distorting trade;
o Prohibition on quantitative restrictions, other than tariff- rate quota’s (TRQ’s) (Josling, 2008: 8)
These renewed rules have caused a more integrated global food and agricultural goods market. Finally, the Dispute Settlement Understanding (DSU) is important for trade-related agricultural measures. The dispute settlements include sanctions on countries, which violate the
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WTO rules or harm other countries. The DSU is in comparison with the other agreements a legal process, not political. The panel is only expected to interpret the trade rules and not to find mutually beneficial concessions for both parties (Josling, 2008: 9). So the introduction of this ‘hard’ law into agricultural trade disputes is according to Josling (2008) a significant
development.
3.2.4. TRADE RELATED MECHANISM REGULATE HEALTHY FOOD CONSUMPTION
There are respectively two trade related mechanisms available to regulate healthy food
consumption. In the first place the agreement on Sanitary and Phytosanitary Measures (SPS) and in the second place the Codex Alimentarius (Codex). These two mechanisms will be explained below.
The SPS agreement was designed to achieve legitimate food safety and quality (Josling et. Al., 2009: 219). This agreement allowed governments to use trade restrictive measures when necessary for the protection of animal, plant and human health. The SPS agreement makes sure that there is global coherence about national food safety and quality regulations and therefore, obliges WTO member states to adhere to certain criteria when they formulate their domestic and trade related regulations (Josling et. All.,2009:219). When following these criteria, countries make sure that they do not impose market restrictions on the costs of other countries. The SPS agreements must, therefore, be seen as an international framework for not harming the rights of your trade partners (Joslin, 2008: 4). Consequently, this increased transparency has caused lower transaction costs for the food industry and enlarged the multinational food system. In preventing countries from taken food safety measurements to protect their own domestic farmers some conditions were made. To induce trade restrictive measurements for the purposes of food safety there must be the case of an acceptable level of risk. For this risk assessment, multilateral standards must be applied or countries must support their actions with scientific evidence. Besides, the SPS agreement guides countries in their use of harmonised and mutually agreed standards, for example in the Codex Alimentarius. In comparison with the TBT, the SPS agreement is stricter with focussing in risk-assessment and the need for scientific evidence.
The Codex Alimentarius or “food code” was designed by the FAO and the WHO in 1962 for the establishment of harmonised international food standards to protect consumer health and to create fair trade (Website FAOa) . The Codex can be divided into three categories:
1. Codex Standards; deals with all the government regulated characteristics
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limit the residues of pesticides in foods. Next to this, the Codex General Standards for Labelling of Pre-packaged foods covers all the foods in the category.
2. Codex Codes of Practise; these include codes of hygienic practices during production and processing so that is made sure that foods are safe for food consumption. 3. Codex guidelines; fall out in two categories (i) principles that set out in certain areas
and (ii) guidelines for the interpretation of these principles. These final
interpretative codex guidelines are important because they include the guidelines for food labelling and how claims are made on the label. For examples foods that claim to be ‘halal’ (WHO & FAO, 2006: 11).
When it comes to the preventative measures for an unhealthy diet one possible measurement could be nutrition claims (example high in fibre, low in fat) on certain products. The Committees on Food Labelling and on Nutrition and Foods will control if the Codex guidelines in these cases are implemented correctly (WHO& FAO, 2007: 36).
3.2.5. FOREIGN DIRECT INVESTMENT RULES AND A HEALTHY DIET
The WTO does not regulate Foreign Direct Investment (FDI). Nonetheless, FDI in food processing and retailing does have an influence on dietary patterns (Hawkes et al, 2010). To organise FDI the Bilateral Investment Treaty (BIT) can be seen as the main instrument (Vandevelde, 1998, 621). Currently, these BIT’s have been established in more than 2952 agreements in more than 200 states (Website UNCTAD). BIT’s are agreements which set the terms and conditions for private investment by national companies made in the jurisdiction of another country. BIT’s are mostly focussed on FDI admission, treatment, and expropriation. Next to this, they cover dispute settlement (Elkins et all, 2006: 812). Next to the BIT rules in the bilateral setting, FDI rules can also be found in regional trade agreements (Joseling et al. 2010: 292). For the most part, International Investment Agreements (IIA’s) are established on a bilateral, regional interregional and multilateral level (Website, UNCTAD). Overall BIT’s and IIA’s offer investors the most favoured nation treatment, this means the free transfer of fund and personnel and protection against denial of justice (Thow, 2010). When governments impose restrictive measurements for the purposes of a healthier diet and this is not in line with the ruling BIT or IIA, investors could claim their lost revenues by the executive government (Fidler, 2010: 293).
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3.2.6. THE GLOBAL TRADE REGIME: HEALTH AND DIET
The problem of an ongoing transition towards an unhealthy diet can, in this case, be seen as the issue-area where the regime does interfere. As described in the theoretical framework the regime may have an influence on the policies of national governments in promoting healthy diets. This trade regime looks as displayed in figure 3.3. Although most (regional) trade
agreements and investment treaties got their own terms and conditions, the basic principles are most of the times the same. These basic norms and principles are situated under the GATT and the TBT. Strategies, which can promote a healthier diet, may be in conflict with the
non-discrimination norm in the NT or MFN principle. By this mean that all governments actions against products that are ought to contain unhealthy levels of fat, sugar and salt must be treated likewise. This is obliged when imported products are similar to domestic products, even when the imported one is more harmful to your health, you must treat them equally. Moreover, discrimination between one's trading partners will fall under the same principle (Fidler, 2010: 284).
Nonetheless, the importance of healthy food consumption and the implication this has for trade restrictions is covered in the SPS agreements. The health hazards of the extended use of a certain product may give governments the opportunity to regulate the importation of a certain product. The difficulty with the SPS agreement lies in the fact that the agreement is made for certain food products, and not for diets. So if a certain product does contribute to an
unhealthy diet, it is not unhealthy in itself. Under the SPS agreement countries can only establish regulations when products are not safe or form risks when just consumed on themselves. There is no option for taking measures against products, which has health consequences in
combination with others or when it is over consumed (Josling et all. 2010: 235) Figure 3.4 Trade Regime: Health and Diet
Source: Compiled by the author
Trade Regime in
Issue-Area
Non-discriminati on in the National Treatment (NT) Norm The least trade restrictive Measurmen ts Norm Non-discriminatio n most favoured Nation (MFN) Norm28
3.2.7. CONCLUSION
In this subchapter, global trade rules have been defined and the global trade regime is designed. The difficulty with defining a uniform trade regime is the fact that a lot of countries do work under regional or bilateral trade agreements and, therefore are bound to different conditions. Moreover, there is no global binding forum for investment rules, which means that these agreements are always arranged under regional or bilateral agreements. Nevertheless, both investment and regional agreements mostly still conduct the same principles as the ones that are situated under the GATT and the TBT and will, therefore, all be defined as the principles in the global trade regime. The relationship of WTO agreements with agricultural trade and diet has been explained. It is important to note, that when speaking about the diets, it all starts with agricultural products, which are turned into foods.
Next to the general global trade rules, it is also important to take in aim the trade agreements that are specially designed to protect public health: the SPS agreement and the Codex Alimentarius (CODEX). Generally, there can be concluded that both the SPS agreement and the Codex are created to protect public health. The difficulty with these trade agreements or standards is that they are shaped to protect people from harmful foods, not diets. This means that under these agreements there is no possibility of taking measurements against certain foods when they are only harmful when overconsumed or consumed in combination with other harmful products.
3.3 THE RELATIONSHIP BETWEEN TRADE AND THE GLOBAL DIET.
3.3.1. INTRODUCTION
The trade regime explained in the theoretical chapter stated that the regime could have on the one hand an influence on national trade policies and on the other hand have an influence on trade flows. In this subchapter, the influence of the trade regime on trade flows will be explained. In detail the influence on trade flows of unhealthy products. Firstly, a conceptual framework will be provided, which explained how trade liberalisation could cause the transition towards a more unhealthy diet. After three pillars of trade liberalisation will be explained against this context; removing import and export barriers, increase in FDI and the
harmonisation of regulations.
Although this information does not directly answer the research question, it is necessary for the overall thesis, that the role of trade in diet is explained. This will help to better form the trade regime.
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3.3.2. A CONCEPTUAL FRAMEWORK FOR THE RELATIONSHIP BETWEEN TRADE AND DIET
In the last few decades, there has been an increase in cross-border flows of food and investment in the agricultural and food industry. This phenomenon has raised policy concerns from three public health-related perspectives: food security, food safety and diet-related risks (Hawkes et al., 2010: 5). In the 1980’s multinational food cooperation’s spread rapidly. As a consequence, global consumption patterns developed from traditional staples towards more energy-intense foods. This has earlier been described as the nutrition transition (Hawkes et al, 2010:7). At the micro-level economic and demographical factors could be on the basis of this transition. At the macro level, the globalisation of the global food system is described as the main incentive. Trade can be described as the key component of globalisation and this is where the relationship
between trade factors and a change in consumption patterns is found (Hawkes et al, 2010: 9). To examine how trade and diet are interrelated the conceptual framework made by Hawkes et. al. (2010) is used. This will show how consumption patterns are affected by trade related factors. Figure 3.4 shows this conceptual framework between trade and diet. Trade liberalisation underlies this framework and it shows how this affected the global supply chain (Hawkes et al., 2010:37). This all has been fuelled by the growth of global food companies, which have changed the food environment in which consumers move. This environment is in the framework
presented by Hawkes (2010) created by food availability, food prices, and food marketing. The choice that the consumer eventually makes may have an effect on their health (Hawkes et al., 2010:36).
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Biological, social, cultural,
behavioural factors
Environment for Food
Choices
Food Supply Chain
Trade Liberalisation
Reduced barriers to
- Imports and exports - Foreign Direct Investment
- Trade in services and facilitating business activity - Harmonisation of Regulations
Agricultural
Production Imports & Exports processing Food
Food
Availability Food Prices
Diets of Consumers & Health Status Food Marketing Food Retailing Advertising & promotion Figure 3.5: Conceptual Framework for the relationship between Diet and Trade
Source: Hawkes et. al. (2010)
3.3.3. TRADE LIBERALISATION AND DIETARY CHANGE; IMPORTS AND EXPORTS
The liberalisation of trade gained momentum in the 1980’s when neoliberal policies described a new role for governments (Shaffer & Brenner, 2004: 467). The WTO can be counted as the global forum for the formation of global trade policy (Thow & Hawkes, 2009: 2150). In multilateral WTO negotiations, regional, bilateral and WTO accession countries can liberalise their trade policies. Next to this, trade liberalisation is often included in loan conditionality by global financial institutions such as the IMF and the World Bank. Trade liberalisation can be established in two ways. In the first place, by opening the national market with removing tariffs, export promotion, reducing restrictions on company ownership, promoting financial flows and trade in service and sectoral liberalism. These measurements will all encourage imports and exports (Thow & Hawkes, 2009: 2151). In the second place, several trade agreements forced different parties to reduce their trade barriers all together at the same time (Hawkes, 2010: 18). These mechanisms will be explained below.
Firstly, when a country decides to remove its trade barriers for imports this may have two direct consequences for its food environment; it increases the total amount of food, feed and raw material in a country and the costs for importing foods will be decreased. This leads to a bigger availability of foods on the market and with more competition from foreign countries, prices will decrease. (Thow & Hawkes, 2009: 2152). Secondly, export promotion tries to support domestic industries in exporting their products. Especially developing countries use certain pieces of land purely for ‘cash crops’; these are crops, which are only produced to be exported.
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This form of operation has caused a decrease in agricultural production and consumption of traditional crops, with as a consequence a shift in people's diet (Thow & Hawkes, 2009: 2154). Next to this, currency devaluation may also be an effective tool for making your export product more attractive. Nonetheless, this also increases the costs of imported goods. If in this case, domestic production is limited or all used in export crops, this will increase the price of food and therewith change food consumption as a whole. However, if domestic production has the ability to keep up with the price developments this may have a positivist effect for their national diet, with a bigger availability of traditional foods (Thow & Hawkes, 2009: 2154)
3.3.4. TRADE LIBERALISATION AND DIETARY CHANGE: FOREIGN DIRECT INVESTMENT
Foreign direct investment can be defined as an investment made from one country into an entity or affiliate of another country. When making this investment firms always have a particular interest (Hawkes, 2004: 358). A direct investment in an existing firm, will creates a
transnational cooperation. With this mechanism, transnational cooperation’s do enter new markets and try to lay their foundations for the future (Hawkes, 2004: 358). Governments have tried to liberalise their rules for investments and as a consequence, transnational cooperation’s have moved their products towards new markets and looked for places with lower production costs (Hawkes, 2004:359). After the downfall of the global economy in 2008 global investment flows declined more than the global GDP or trade flows. However, 2015 shows an upturn in global FDI flows, and it is likely this will only increase till 2017 (UNCTAD, 2015). Nonetheless, this trend shows some regional differences. Whereas developed and transitional economies show a decrease in global investment attraction, developing nations receive 55% of the global investments flows (UNCTAD, 2015). Besides, one can divide sectoral differences in these investments flows. In the developing world, the most profitable sectors to invest in are
agricultural, hunting, food, beverages and tobacco industries (UNCTAD, 2007). Table 3.3 shows this investment flows in 2006. These FDI flows and firms reallocating their markets may have an influence on what people eat.
32 Table 3.3. Largest of foreign food affiliates in Africa, 2006 Company Host
economy Home Economy Industry Sales Employees
Distell Ltd South Africa United
Kingdom Food products, beverages and tobacco 1 045 4 400 Société Africaine De Cacao Sa
Cote d’Ivoire Switzerland Food products, beverages and tobacco
963 400
Nestle Côte
d'Ivoire sa Cote d’Ivoire Switzerland Food products, beverages and tobacco 951 836 Kwaba Sociedade Industrial e Comercial
Angola United States Food products, beverages and tobacco 2 684 - Clover Botswana Pty Ltd
Botswana South Africa Food products, beverages and tobacco
661 200
Source: (UNCTAD, 2007)
Moreover, Food processing is the highest recipient of FDI globally (UNCTAD, 2015). This has led to a foreign dominance in the highly processed food sector. Highly processed foods can be defined as foods that are created from substances extracted from foods (including fats, starches, and sugars). Examples of these highly processed foods are energy-dense snacks, sweetened breakfast cereals, biscuits and cakes, sugary drinks, ‘fast food’, reconstituted animal products, and ready-to-eat packaged dishes (Website PAHO). As shown in figure 3.6 the sale of ultra-processed foods in for example Latin America increased for a big part in the last 15 years.
But why do transnational food companies invest in this sector? The answer is very clear; they want to profit from a growing consumer demand caused by a growing world population. Next to this, a better investment climate arranged under the GATT and other trade agreements contributed to these developments (Hawkes, 2004: 360). Moreover, highly processed foods have some characteristics that make them very suitable to invest in. And on the other hand, FDI is, in comparison with trade, a very profitable tool for transnational cooperation’s to broaden their market. In the first place, FDI can be very cost-effective in reaching foreign markets. Trading food products may bring extra costs for transporting and storing, and those can be higher than the actual production costs. These costs will be reduced when using FDI and replace the production from the home country to the host country. Moreover, the price for certain raw
33
products may be lower in the host country than in the home country, which makes the
production even less expensive (Hawkes, 2004: 360). Secondly, FDI is an easy tool to jump over trade barriers. This will not be the main driver for FDI, but in some cases, transnational
companies do choose for FDI to avoid costly tariffs (Hawkes, 2004:360). Thirdly, FDI can facilitate branding and promotional activities, which can secure global brand recognition. Fourthly, FDI may put transnational companies into the position of market leader and finally, a FDI sales strategy makes sure a transnational company can capture the entire production, marketing and distribution processes in local circumstances.
To make well-founded judgements about the role of FDI as one of the underlying causes of obesity and NCD’s the evidence presented above is not substantial enough. Though, FDI made it possible to increase the amount of highly processed foods in the global supply chain and therefore has an effect on what people eat. To answer the research question it is, therefore, important to describe the role of foreign direct investment. Besides, by including FDI and FDI rules also the role of private entities will be covered. This will be examined in the case study in chapter 5.
Figure 3.6. Ultra-processed foods and drinks sales per Latin-American Country
Source: (Website PAHO)
3.3.5. HARMONISATION OF REGULATIONS
Regulative policies are usually organised by national governments, in spite of , food, and nutrition regulations are established in a global field. Examples of international organisations, which concern about the topic are the United Nations (UN) the Codex and the WTO.
