The impact of COVID-19 on agricultural and food trade and global value chains
The financial crisis of 2008 and the consequent economic slowdown stalled the evolution of agri‑food GVCs, and the COVID‑19 pandemic is expected to disrupt their potential in global trade and growth further. GVCs foster trade linkages that act as channels of technology and knowledge diffusion during periods of economic growth; similarly, they can transmit economic shocks and their impacts. As firms address the trade‑off between efficiency and resilience to the economic slowdown, they may pursue a process of localization of food production by reshoring activities for foods that allow it.
Such strategies could significantly undermine efficiency gains that are associated with comparative advantage and could increase domestic food prices – which is undesirable in times of declining incomes. Relying on food and agriculture from domestic and multiple sources across the world is a form of resilience against food insecurity and economic downturns. Global shocks like the 2008 financial crisis and the COVID‑19 pandemic require international collaboration and coordination rather than measures that promote self‑sufficiency in food, especially when impacts are not occurring in all countries at the same time. Therefore, trade provides an efficient avenue to better manage risks arising from a shock and to increase resilience. In the context of COVID‑19, efforts to minimize the disruption of GVCs and promote agricultural and food trade can generate both short‑ and long‑term benefits.
Maximo Torero is the chief economist of the Food and Agriculture Organization of the United Nations in Rome, Italy. Throughout his career at multilateral organizations and global research institutions, he has provided intellectual and strategic leadership to translate research into policy, fighting poverty.