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Deglobalisation Series | (de)globalisation and the fear of trade by Ana Cristina Canales Gomez

While the consequences of globalisation over health and nutrition can be contradictory, trade openness can be a relevant policy for reducing food insecurity. This relatively inexpensive action, when compared to technology or research-based programmes, can increase the availability of nutritional foods, increase higher nutritional variety in diets, and can stabilise the food supply, reducing food shortages.


“One of the biggest ideas to hit the political world in recent years is that politics is increasingly defined by the division between open and closed, rather than left and right” (The Economist, March 24, 2018)

The recent trend of pushing against globalisation is based on different sources of information that varies from science-based evidence to ideas that trade and global agreements form part of a mastermind plan of invisible benefactors of the globalisation system. This phenomenon of deglobalisation has occurred before, but a major difference can be seen between the current and previous manifestations: in the 1930s, deglobalisation was pushed by governments, while the current expression of deglobalisation is pushed by the general public through social media.

When it comes to health and nutrition, the matter of globalisation and its impacts can be somewhat contradictory, and as with most economic matters, the perception of globalisation will depend on the viewer’s position: if you are in the LDCs where malnutrition is a leading cause of mortality, hinders development and entails national losses of around 6% of GDP[1], you might see globalisation as a beacon that could signal the introduction of greater nutritional diversity to local diets. If, on the other hand, you live in countries such as Chile or Mexico where undernourishment is no longer the main issue and the country now faces a transitional economic phase wherein obesity becomes a cause of concern, the increased inflow of foods from countries such as the United States might be viewed in a more negative light—as an influx of unhealthy types of food that contribute to obesity (Giuntella 2017).

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Graph 1 Changes in trade (% of GDP) and the prevalence of stunting in children under 5 years of age, world level. Source: author’s elaboration using STATA and the WDI (Last updated January 25, 2018).

From a descriptive perspective, during the last 30 years, and particularly after the Marrakech negotiations that led to the formation of the World Trade Organization (WTO) and its agreements, there has been an increase in trade openness and a reduction in the prevalence of stunting (PAHO 2017), even though hunger is still the leading cause of death and primary contributor to disease worldwide (Pongou et al. 2006).

We can assess the impact of trade openness using the Depth of the Food Deficit (DFD), an outcome indicator that measures inadequate access to food (Reddy et al. 2016, Santeramo 2015) by determining the amount of calories needed to lift the undernourished out of this position, ceteris paribus (Reddy et al. 2016, World Bank Group. 2017, Dithmer and Abdulai 2017).

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Table 1: Effect of the import and export value indexes (2000=100) over the depth of the food Deficit (kcal per person per day), world level.

Table 1 shows the effect of Export and Import Value Indexes, included in logarithmic form, over the DFD. There is overall a strong and significant relation between both values and the indicator: an increase of one percentage point of the Import Value Indexes reduces the Depth of the Food Deficit in a range of 21 to 37 kilocalories, such change being consistent to the inclusion of all controls. Hence, a reduction of the DFD responding to an increase in both exported and imported values speaks of narrowing gaps between current nutritional status and the average dietary energy requirements of the population, and can contribute to SDG2—Zero Hunger.

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Table 2: Effect of import and export Values (2000=100) over depth of the food deficit (kcal per person per day) in Latin American countries (excluding Haiti, Cuba and the Small Caribbean States).

The same regression can be run for the Latin American countries, including a variable constructed by the author measuring the number of food security programmes per country per year. The impact of trade openness over DFD is still strong and relevant in magnitude, and there is a linear albeit insignificant relation where programmes reduce the prevalence of undernutrition. When the quadratic variable is applied it hints—the coefficients are not significant—that such an effect only goes so far, and that, after a breaking point, these programmes show detrimental results.

Considering all of the above, the evidence shows that trade openness is in fact a relevant policy when it comes to reducing food insecurity, increasing social wellbeing and leading to socioeconomic progress. Furthermore, it would seem that trade openness is a more effective tool than the implementation of specific programmes that attempt to target food insecurity that many times end up doing more harm than good. This could be explained by the fact that there is a trend towards the indiscriminate adoption of programmes, both local and foreign. Additionally, more programmes usually signal the lack of effective stakeholder coordination, the lack of continuity in governmental strategies, and the inefficient expenditure of available resources.

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Table 3: Effect of export and import Values (2000=100) over obesity prevalence for children under 5 years of age, world level.

When it comes to obesity, our research shows inconclusive results: there is a significant albeit small effect of trade openness—both export and import values—on the prevalence of obesity, but this effect fades when controls are included in the models. This can be due to the fact that obesity is a more recent phenomenon and besides integration of economies into global markets responds to many factors, such as economic growth, urbanisation trends, and the rise of the middle class (PAHO 2017).

Conclusion

While the consequences of globalisation over health and nutrition can be contradictory, it is an effective tool for the reduction of hunger, currently the leading cause of death in the world. This relatively inexpensive action, when compared to technology or research-based programmes, can increase the availability of nutritional foods, increase higher nutritional variety in diets, and can stabilise the food supply, reducing shortages in times of dearth. Overall, opening up to trade, at least from the health and nutrition perspective, seems to be a policy worth trying, but there is only so much that trade can do without a strong institutional background.

[1] Which is the case for Central America and the Dominican Republic according to the CEPAL (as cited by Jara Navarro (2008: 9)

[2] According to the WHO, stunting is defined as the impaired growth and development that children experience from poor nutrition, repeated infection, and inadequate psychosocial stimulation. Children are defined as stunted if their height-for-age ratio is more than two standard deviations below the WHO Child Growth Standards median.


References
Dithmer, J. and A. Abdulai (2017) ‘Does Trade Openness Contribute to Food Security? A Dynamic Panel Analysis’, Food Policy 69: 218-230.
Giuntella, O., M. Rieger and L. Rotunno (2017) ‘Weight Gains from Trade in Foods: Evidence from Mexico’, University of Pittsburgh, Kenneth P. Dietrich School of Arts and Sciences. Working Paper Series 17/010 Weight gains from trade in foods: Evidence from Mexico. 17/010.
Jara Navarro, M.I. (2008) ‘Hambre, Desnutrición y Anemia: Una Grave Situación De Salud Pública’, Revista Gerencia y Políticas de Salud 7(15): 7-10.
PAHO (Last updated 2017) ‘Sobrepeso Afecta a Casi La Mitad De La Población De Todos Los Países De América Latina y El Caribe Salvo Por Haití’ (a webpage of PAHO/WHO). Accessed April 12 2017 <http://www.paho.org/chi/index.php?option=com_content&view=article&id=856:sobrepeso-afecta-a-casi-la-mitad-de-la-poblacion-de-todos-los-paises-de-america-latina-y-el-caribe-salvo-por-haiti&Itemid=1005&gt;.
Pongou, R., J.A. Salomon and M. Ezzati (2006) ‘Health Impacts of Macroeconomic Crises and Policies: Determinants of Variation in Childhood Malnutrition Trends in Cameroon’, International journal of epidemiology 35(3): 648-656.
Reddy, A.A., C.R. Rani, T. Cadman, S.N. Kumar and A.N. Reddy (2016) ‘Towards Sustainable Indicators of Food and Nutritional Outcomes in India’, World Journal of Science, Technology and Sustainable Development 13(2): 128-142.
Santeramo, F.G. (2015) ‘On the Composite Indicators for Food Security: Decisions Matter!’, Food Reviews International 31(1): 63.
The Economist (2018) ‘Bagehot: Rethinking Open v Closed’, The Economist March 24th-30th 2018 9084: 33.
WHO (Last updated 2017) ‘Noncommunicable Diseases’ (a webpage of WHO Media Centre). Accessed April 12 2018 <http://www.who.int/mediacentre/factsheets/fs355/en/&gt;.
Winters, L.A. (2004) ‘Trade Liberalisation and Economic Performance: An Overview’, The Economic Journal 114(493).
World Bank (Last updated 2018) ‘World Development Indicators’ (a webpage of The World Bank). Accessed March 1 2018 <http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators#&gt;.

0894f1c-2.jpgAbout the author:

Ana Cristina Canales Gómez is a veterinarian at the Universidad de Chile who holds a Masters degree in Public Policy from the same institution and a Masters degree in Development Studies from the ISS. Currently, she works as a consultant for Food & Foodstuffs Trade and Nutrition Policies in the Food and Agriculture Organization (FAO).

 

Weight gains from trade in foods: evidence from Mexico by Osea Giuntella, Matthias Rieger and Lorenzo Rotunno

Originally published on VoxEU.org on 02 February 2018

The majority of obese adults are now found in developing countries. This column presents new evidence on the effects of trade on obesity in Mexico. The results indicate that across Mexican states, a one standard deviation increase in the unhealthy share of food imports from the US increases the likelihood of individuals being obese by about 5 percentage points. As developing countries around the world open up their food markets to industrialised countries, they may be accelerating their ongoing nutrition transition and imposing high future costs on their health systems.


Obesity is not the first health challenge that comes to mind when thinking about the global south. Obesity is rather associated with the Global North, particularly the US (think soda drinks, fast food, and lack of exercise). But this conventional wisdom is passé. The majority of obese adults – those with a body mass index of 30 and more – are now found in developing countries (Ng et. al 2014). The Global South is in the midst of a health and nutrition transition (Popkin and Gordon-Larsen, 2004). While communicable diseases and undernutrition are on a (slow) decline, non-communicable diseases and overnutrition are taking hold of populations, and they are doing so rapidly.

Given the known health risks (such as diabetes and cardiovascular diseases) and economic costs of obesity, what can policymakers in the Global South do to prevent obesity in epidemic proportions? Important lessons may come from countries that have already undergone this transition and from examining potential drivers that are amenable to public policy. The much-discussed case of Mexico is ideal for such an exercise.

Obesity and trade: The case of Mexico

Mexico’s obesity rates increased from 10% to 35% over the period 1980-2012 (according to our analysis sample including adult females). And among the already obese OECD countries, Mexico ranked second in 2015, surpassed only by the US (OECD 2017).

Coinciding with these profound changes in population health, Mexico has opened itself to trade in foods mostly with the US. Currently over 80% of Mexican food imports are American. In Figure 1, we show the evolution of Mexican imports of foods and beverages from the US over time. While overall food imports have increased dramatically, food that is typically considered unhealthy has surged quite spectacularly. Notably, exports of ‘food preparations’ are 23 times larger in 2012 compared to 1989.

Figure 1 Mexican imports of food and beverages from the US over time

In Figure 2, we classify Mexican imports from the US as unhealthy or healthy food using the United States Department of Agriculture (USDA) Dietary Guidelines (for instance, ‘dark green vegetables’ are recommended for increased consumption, while ‘refined flour and mixes’ are advised for reduced consumption). US exports to Mexico of both food groups have increased since the late 1980s, but unhealthy food groups at a much faster rate.

Figure 2 Unhealthy and healthy Mexican food and beverage imports from the US

Such trends naturally raise the suspicion of a possible, causal link running from greater consumption of US foods to rising obesity prevalence (e.g. Jacobs and Richtel 2017, Rogoff 2017). However, to date no paper has attempted to estimate a direct causal relationship between obesity and trade.

Estimating weight gains from trade in foods

In a new working paper, we quantify the impact of US food exports on individuals’ likelihood of being obese across Mexican states over the period 1988 to 2012 (Giuntella et al. 2017). To this end, we match several rounds of anthropometric and household expenditure surveys with product-level food trade data. Our main results are based on female adults for which data are available over this long time span.

We calculate the unhealthy share of food imports from the US by differentiating food items using the USDA Dietary Guidelines for Americans. We then allocate these aggregate food imports (healthy, unhealthy) to Mexican states. More specifically, we exploit variation in Mexican states’ historical expenditure by food products prior to trade integration. Our identification strategy assumes that aggregate trade shocks heterogeneously impact sub-national units as a function of time-invariant or ‘baseline’ variables (e.g. Dix-Carneiro and Kovak 2017, Autor et al. 2013). Note that there is substantial heterogeneity across Mexican states in obesity rates and historical food expenditure patterns, which further motivates our modelling approach.

Our empirical models also control for a host of state (such as food prices, GDP, FDI, migration) and individual covariates, as well as state fixed effects and state-specific time trends. In a second empirical strategy, we relate long-run differences in obesity rates at the state level to changes in unhealthy food imports conditional on baseline covariates. We instrument US exports of unhealthy foods to Mexico with corresponding US exports to other countries. And alternatively, we use ‘gravity residuals’ singling out the comparative advantage of the US in unhealthy food production relative to Mexico (akin to Autor et al. 2013).

Quantifying weight gains from trade in foods

We find that a one standard deviation increase in the unhealthy share of imports (equivalent to a 14 percentage point increase) raises the likelihood of obesity by about 5 percentage points. The effect amounts to 18% of the sample average in obesity. Findings using long-run difference models and IV estimates, as well as gravity residuals, are qualitatively similar – pointing to a plausibly causal effect.

Our main finding passes a series of robustness and placebo checks:

  • Plausibly unrelated imports from the US (such as apparel products) do not impact obesity.
  • The effects associated with food imports from the rest of the world are insignificant and small, underlining the specific importance of US foods for obesity.
  • Likewise, unhealthy Mexican food exports to the US are not correlated with obesity.
  • Similar patterns emerge if we employ food imports from the US for final demand.
  • Overall (the sum of healthy and unhealthy) food imports do not correlate with obesity, highlighting the importance of differentiating ‘unhealthy’ and ‘healthy’ US foods.
  • Our main results are robust to dropping Mexican states one by one.
  • Similar patterns are obtained using body mass index (in quantile regressions) or overweight as outcome variables.

Health inequality and trade

Weight gains due to trade vary across socioeconomic groups. As illustrated in Figure 3, women with low levels of education face a greater risk of trade-induced obesity – their obesity risk is 5 percentage points higher than that of more educated women in a Mexican state with average exposure to unhealthy food imports. This differential goes up to 8 percentage points as the state’s trade exposure rises by 14 percentage points (one standard deviation). This interaction effect between education and trade is robust to the inclusion of state-time fixed effects (that is, purging the main local effect of trade exposure). The results are consistent with the well-known hypothesis that more educated individuals are more efficient producers of health investment than less educated ones. This educational gradient may be exacerbated in food environments where individuals are faced with more unhealthy food choices (Mani et al. 2013, Mullanaithan 2011, Dupas 2011).

Figure 3 Inequality between education groups in obesity risk and unhealthy food imports

Income, prices, and tastes

Having established a direct impact of US food exports on obesity prevalence in Mexico, we next turn to exploring possible mechanisms. Trade impacts incomes, prices, and tastes (due, for instance, to exposure to a foreign lifestyle and advertisement), all of which may drive the observed impacts on obesity. First, note that our main effect is robust to controlling for state GDP per capita, the total share of expenditures on unhealthy foods, as well as the relative prices of healthy versus unhealthy goods. Second, estimating demand equations over healthy and unhealthy food groups, we find that exposure to unhealthy foods from the US has redirected overall expenditure towards unhealthy foods. This observed shift is robust to controlling for real income and prices (for a similar empirical strategy, see Atkin 2013). In other words, trade with the US appears to influence tastes for relatively unhealthy foods. Increased variety of unhealthy foods boosts demand. These patterns are in line with a shift to ‘Western’ food consumption and increases in body weight among East Germans following the fall of the Berlin Wall (Dragone and Ziebarth 2017).

Policy implications

Nations have a lot to gain from trade. But weight gains and the associated health losses from trade in foods have been largely omitted from the equation. As developing countries around the world open up their food markets vis-à-vis industrialised countries – which tend to have a comparative advantage in more processed and less healthy foods – they may accelerate their ongoing nutrition transition. Obesity may put high costs on future health systems and the economies of the Global South.

Undoing the nutrition transition is likely harder than moderating it in the first place. Obesity and unhealthy food habits tend to be persistent. The Mexican experience is informative for countries in the Global South. Integrating nutrition and other health concerns into the formulation of food trade policies is paramount,[1] and such concerns should feature high up on the agenda in future trade negotiations.

Our findings suggest that differentiating between healthy and clearly unhealthy imports may help slow down secular trends in obesity around the world.


References

Atkin, D (2013), “Trade, tastes, and nutrition in India”, American Economic Review 103(5): 1629-1663.
Autor, D H, D Dorn and G H Hanson (2013), “The China Syndrome: Local Labor Market Effects of Import Competition in the United States”, American Economic Review 103(6): 2121-68.
Colantone, I, R Crino and L Ogliari (2017), “Import competition and mental distress: The hidden cost of globalization”, mimeo.
Dix-Carneiro, R and B K Kovak (2017), “Trade Liberalization and Regional Dynamics”, American Economic Review 107(10): 2908-46.
Dragone, D and N R Ziebarth (2017), “Economic Development, Novelty Consumption, and Body Weight: Evidence from the East German Transition to Capitalism”, Journal of Health Economics(51): 41-65.
Dupas, P (2011), “Health behavior in developing countries”, Annual Review of Economics 3(1): 425-449.
Giuntella, O, L Rotunno and M Rieger (2017), “Weight Gains from Trade in Foods: Evidence from Mexico”, University of Pittsburgh Working Paper No. 17/010.
Jacobs, A and M Richtel (2017), “A Nasty, Nafta-Related Surprise: Mexico’s Soaring Obesity”, New York Times, 11 December.
Mani, A, S Mullainathan, E Shafir and J Zhao (2013), “Poverty impedes cognitive function”, Science341(6149): 976-980.
McManus, T C and G Schaur (2016), “The effects of import competition on worker health”, Journal of International Economics 102: 160-172.
Mullainathan, S (2011), “The psychology of poverty”, Focus 28(1): 19-22.
Ng, M et al. (2014), “Global, regional, and national prevalence of overweight and obesity in children and adults during 1980-2013: a systematic analysis for the global burden of disease study 2013”,The Lancet 384(9945): 766-781.
Pierce, J R and P K Schott (2016), “Trade Liberalization and Mortality: Evidence from U.S. Counties”, NBER Technical Report No. 22849.
Popkin, B M and P Gordon-Larsen (2004), “The nutrition transition: worldwide obesity dynamics and their determinants”, International Journal of Obesity 28: S2-S9.
Rogoff, K (2017), “The US is Exporting Obesity”, Project Syndicate, 1 December.

Endnotes

[1] Related studies provide evidence for adverse effects of manufacturing imports on the health of workers – see for instance, Colantone et al. (2017) and the associated VoxEU column, McManus and Schaur (2017), and Pierce and Schott (2016).   

Picture credit: Adam Clark


giuntella2Osea Giuntella is Assistant Professor of Economics at the University of Pittsburgh.
riegerMatthias Rieger is Assistant Professor of Development Economics at the  International Institute of Social Studies, Erasmus University Rotterdam.rotunno_4Lorenzo Rotunno is Assistant Professo of Economics at the Aix-Marseille University.