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Production and Markets

IB DP Geography
       
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The aim of this lesson:

  • To be able to examine the impacts at a variety of scales of trade barriers, agricultural subsidies, bilateral and multilateral agreements, and transnational corporations (TNCs) on the production and availability of food.
 
Geography Starter

Starter

 
Where we live and work shapes what and how we eat and drink
Image: Where we live and work shapes what and how we eat and drink, a Creative Commons Attribution (2.0) image from geographyalltheway_photos's photostream
 

Some of the food that is produced is not intended for the domestic market. These cash crops are intended to be exported, which provides foreign exchange for the government, and guarantees jobs are maintained as long as the relationship with the overseas market is maintained, and the price is guaranteed. This is not certain.

At times of increasing global pressure on food production and markets, countries are concerned to ensure food security, while keeping an eye on the price of this security. Transnational Corporations, mindful of their markets are involved at this point in negotiations to ensure that they are part of any future equation. When many countries are no-longer self-sufficient in food, these huge companies play an important role in our daily experience of food, and spend billions on marketing to ensure that they remain an important presence in our lives. Every day, food is moved in huge quantities around the world. Who produces it, where is it sold, and how does it get to us? This section of the course will begin to answer some of those questions.

 

Here's an example of some of the stories that have made it into the British tabloids:

  • Banana's should not be too bendy.
  • Waters does not hydrate you.
  • Popular British snack "Bombay Mix" had to change its name to "Mumbai Mix".
  • Prunes are not laxatives.
  • Barmaids cannot show their cleavage when serving customers.
  • Turnips cannot be labeled "swedes", except in one place.
  • Corgis are banned.
  • Diabetics are banned from driving.
  • Eggs cannot be sold by the dozen.
  • European sports teams have to have the European flag on their uniforms.
 
Hyperlink
  Business Insider - Guess Which Of These Crazy EU Laws Are Actually Real
 

There are numerous strict EU standards for imported food products, including hygiene and health standards as well as regulations for size, form and colour of a certain product. While the regulations are supposed to protect European consumers, they can have devastating impacts on small farmers in export countries. These standards have prompted many stories in some newspapers who are concerned at the apparent silliness of some of the standards, which have been relaxed in recent years after concerns over food waste that they were partly to blame for.

These regulations may have serious consequences for some producers elsewhere. In Morocco for instance, a report suggested that in one year’s crop, around 40% of the tomatoes that had been cultivated to be exported to Europe failed to meet the European standards. Instead of being shipped abroad, the tomatoes were sold cheaply on Moroccan markets. Small local farmers have a hard time competing with the cheap produce and struggle to survive. Such a practice is sometimes called ‘food dumping’ and can be an unintended consequence of food aid.

 
Geography Activities

Activity

 
 
This section covers some of the policies that influence the production of food, and the markets where it can be sold. The Global world market is very complex. The diagram below shows world trade in just two commodities, and the connections and volumes are variable.
World Map - Grains and Oilseeds
 
You will need to explore the six sections below, making notes as appropriate, before completing the follow-up tasks.
 
Google Doc
  Collaborative Note-making Document [Google Document]
 
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Geography Activities
Geography Activities

Trade Barriers

Trade barriers are often put in place around specific countries or areas. These barriers are not necessarily ‘physical’ barriers, although they may be in some circumstances due to the nature of the relationship with surrounding countries. Some physical barriers would include the restrictions facing some contested areas of the Middle East, or enclaves within countries.

Trade barriers include tariffs (additional charges) and quotas (limits on what can be imported or exported).

One problem that faces farmers wanting to import their products into the EU is the restrictions, some of which we explored during the starter activity. They have to meet certain standards, some of which are not based on the taste or quality of the food, but its physical dimensions. There have also been examples of products having to undergo inspections which delay its arrival on the market, which may mean it is not competitive in price.

Sometimes barriers are put up for political reasons, at other times they may be to protect consumers. Russian food import standards were raised after the country became a favoured ‘dumping ground’ for meat and fish products produced by EU countries that had failed to meet EU standards for sale within the EU.

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Geography Activities
Geography Activities

Agricultural Subsidies

Agriculture is an industry that has often required financial support, particularly given the globalised nature of the world, and the material flows of food around the world.

In the European Union, there has been a history of additional investment. In many parts of the world, agriculture is not a profitable activity due to the low prices that farmers are paid for their produce. Farmers have to look a year or two ahead and predict what the likely market conditions will be when deciding how to farm their land. They are also dependent on the vagaries of the weather.

Some parts of the British Isles, for example receive additional support and payments. Hill Sheep farmers get additional payments due to the harsh nature of the land which they farm, which restricts the density of animals, and therefore the profit they can gain from farming the land. Their work maintains a landscape which is of high amenity value. Other payments are related to the environment, so that farmers may be paid for planting hedges, draining land or repairing stone walls.

 
 
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Geography Activities
Geography Activities

Bilateral Agreements

A bilateral agreement is one made between two different ‘parties’, which could be countries, which benefits both.

Some of these agreements relate to former colonies of European countries, which developed a relationship involving the production of foods, some of which might have a particular cultural significance. Recent bilateral negotiations took place between the EU and India.

India is one of the world’s largest potential markets for EU products, and there were discussions over furthering links between the two areas.

More information on these discussions is available here:

Hyperlink
  European Commission - India
 
Can also occur when a consumer such as a large supermarket makes a decision e.g. the Co-op decided to only sell Fairtrade bananas which meant those countries which had more producers signed up to the scheme benefited.
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Geography Activities
Geography Activities

Multilateral Agreements

A multilateral agreement is one that involves many countries. Agriculture can also be protected by the tariffs that are introduced when countries group together to form a Trading Bloc. Details on the main trading blocs are here:
BBC News
  A Guide to World Trade Blocs [9 December 2005]
 

Countries merge together for various reasons. This is usually for the benefit of the participating countries. The EU is obviously one example of a trading bloc, but there are many others.

There have also been multilateral agreements which have been agreed between these organisations and other NGOs (Non-governmental organisations).

These include the Lome and Cotonou Conventions which date back over 30 years and were intended to support producers in the less developed parts of the world. These included agreements on the import of tropical produce such as bananas, which clearly cannot be grown in the EU.

These agreements are particularly important when a country is dependent on a single crop or product for a large proportion of its total exports. There are also problems when production is greater than consumption: for example more coffee is grown each year than is drunk, despite the rapid growth of coffee chains such as Starbucks and Costa.

Another organisation involved here is the World Trade Organisation (WTO) – this has been in existence since 1995 when it replaced GATT (General Agreement on Tariffs and Trade.

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Geography Activities
Geography Activities

TNCs: Transnational Corporations

Major food corporations include the following:
Cargill
Coca Cola
Kraft
McDonald's
Nestle
Unilever
 

Many of the world’s biggest companies have become that way by offering a basic necessity which we cannot stop buying.

TNCs are driven by profits rather than the desire to provide us with the best possible food. Decisions are not made on the grounds of existing arrangements, and firms are not necessarily sympathetic to changes in local conditions.

McDonalds have a strategy which focuses on a one-brand image, but some of these other food companies own lots of brands, and their involvement is less obvious. This can mean that their overall operations are not always subjected to the same public focus.

Large companies have increased their involvement in more aspects of the production chain.

This has increased their profits. Felicity Lawrence in her book Not On the Label: What Really Goes into the Food on Your Plate says: “Fifty years ago, 50-60p of every pound spent on food and drink in the UK went to the farmers, now it is just 9p in every pound.”

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Geography Activities
Geography Activities

Common Agricultural Policy (CAP)

“Africa needs more money, but if it's not linked to ending European agricultural subsidies, it's blatant hypocrisy. The way to build lasting economic growth, healthcare and education is for Europe to end the CAP. Stopping trade-distorting subsidies will allow African products to be exported and stop European goods being sold more cheaply in Africa.” – Lord Digby Jones (2005)
 
[This has featured on exam specifications for many years, and numerous materials to support your investigations of its successes and notable failures will be found online and in textbooks by using appropriate search techniques. For that reason, this resource provides a summary of the key points which are relevant to the IB Course.]
 

The Common Agricultural Policy (CAP) introduced in the 1960’s was a system devised to offer financial support for farmers in the European Union countries. It introduced a minimum price for part of what farmers produced the aim being to increase productivity so that food security was increased and the EU became more self sufficient, and less reliant on food imports. The knock on effect of this was for the farmers to earn a decent living whilst being able to offer the customer a guaranteed supply at a moderate price. In order to offer stability to the internal market, the EU guaranteed to ‘buy’ produce at a predetermined price and impose charges on cheaper imports. Farmers started to produce more food than before, and by the early 1980’s subsidised goods had become so overproduced they couldn’t sell them all. The EU was unable to sell this surplus as it would impact on markets, which led to the storing of food in warehouses. The phrase ‘wine lakes’ and ‘butter mountains’ raised this issue in the public consciousness.

In 2007, information was revealed in the House of Commons that large amounts of products were still being over-produced.

At the time the EU was apparently storing 12,187,741 tonnes of cereals, and there were 1,112,651 tonnes of sugar - enough for 445 billion cups of tea; 117,831 tonnes of butter and milk, which would spread 78.5 billion sandwiches and fill 252 million pint bottles; and enough rice - 61,589 tonnes of it - for 615 million curries.

The policy has undergone reform several terms, partly as a result of concern over the cost of implementing the policy compared with other aspects of EU membership. 2010 Budget for CAP: 44 billion Euros (around 30% of EU budget) – costs Britain around £10 billion a year.

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Geography Activities
Geography Activities

Follow up task

To be completed once each of the six sections above have been visited.

  1. What are the major problems facing farmers in the less developed parts of the world who want to export food? Try to identify some case studies of the impacts of particular policies on individual farmers.
  2. What is meant by the term ‘tariff escalation’ and how does it impact on producers from the less developed countries of the world?
  3. Which trade groupings does the country where you live participate in?
  4. How is your family personally affected by the actions of decisions made by your country’s government?
  5. Research the ‘Everything but Arms Initiative’, which was introduced in the EU, and its potential impact on food imports.
 
Geography Review

Review

 
Geography Activities

6 mark question

Geography Resource
 
Geography Activities

Extended response question

Using examples from a variety of scales, discuss the impacts of three international operations upon the production and availability of food. [10 marks]

The markbands can be found here - you need to look at Paper 2.

 
Essay Graphic Organiser
 
Alan Parkinson   These Geography of Food and Health resources were written by Alan Parkinson and edited by Richard Allaway. Alan is a an independent geography consultant, author and trainer, fellow of the Royal Geographical Society, Chartered Geographer and founder member of the Geography Collective.
 

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