OTN Special Update - Economic and Trade Policies Related to Diet and Obesity in CARICOM [2013!11!21]

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OFFICE OF TRADE NEGOTIATIONS
… for trade matters
SPECIAL
OTN Update
Eco nomic and Trade Policies
Related to Diet and Obesity in
CARICOM
The 37th Meeting of the Council on Trade and
Economic Development (COTED) of the Caribbean
Community (CARICOM) held in Georgetown, Guyana
on 5‐9 November 2013, recognized that trade and
health‐related issues are areas for joint attention to
foster improved sustainable development prospects
in the Caribbean. The COTED therefore established a
small working group coordinated by the Caribbean
Public Health Agency (CARPHA), the Office of Trade
Negotiations (OTN) and CARICOM, with inputs from
relevant entities, to prepare for a joint meeting of the
COTED and the Council for Human and Social
Development (COSHOD) in 2014, and the wider
engagement with the regional food manufacturing
industry.
The proposed collaboration between CARPHA and
CARICOM follows from the recognition by the
Caribbean Commission on Health and Development
in 2005 of the social and economic burden of non‐
communicable diseases (NCDs), in large measure
due to profound changes in the way of life of the
people of the Region, including their diets and
nutritional patterns, which had been heavily
influenced by globalization of the food supply,
mechanization, and decreased physical activity,
tobacco use, and harmful use of alcohol.
The interface between agriculture, economic and
trade policies and nutrition is particularly relevant
in the context of efforts to address the rise in the
incidence of non‐communicable diseases such as
obesity, heart disease and diabetes which have
become chronic in most Caribbean societies and
should engage the attention of both policy makers
and technocrats alike.
From the onset, it is important to emphasize the
value of policy coherence in the thrust to address
the problem of nutrition‐related diseases.
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery
(CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments
germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate
and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy
developments of currency and importance to the Caribbean.
http://www.crnm.org

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Effective strategies to deal with non‐communicable
diseases such as those caused by poor dietary intake
should, of necessity, be holistic and should draw upon
all relevant sectors including health, education, sports,
environment, agriculture and trade.
In seeking to establish the link between trade and
economic policies and nutrition, I draw heavily on
research undertaken by Adam Drewnowski, Andrew
Hanks and Trenton Smith in which they sought to
examine the relationship between international trade,
food and diet costs and the global obesity epidemic.
They observed that energy‐dense diets , rich in added
sugars and fats, are far more affordable per unit of
energy than diets composed of whole grains, lean
meats, fish, low‐fat dairy products and fresh fruits and
vegetables. They note further that inexpensive
starches, fats and sweets may represent the only
viable food option for low‐income consumers and as a
result, more people consume energy‐dense diets,
especially in lower income groups. These findings,
which were based on research in the United States,
may have relevance for the link between food costs
and nutrition in the Caribbean and suggest that the
low energy costs of the diet ($/1000 kcal) rather than
the consumption of fast foods, sweets or deserts, per
se, may be the most powerful predictor of weight gain
and, by extension, of non‐communicable diseases.
A cursory review of the changing diet of Caribbean
countries will reveal a nutrition transition in which the
traditional plant‐based diets have been replaced with
more sugars and vegetable and animal fats.
International trade is likely to have propelled the
growth of nutrition related diseases by increasing the
availability and lowering the cost of these energy‐
dense diets.
Drewnowski, et al, examine five key propositions that
link economic theory with public health findings
regarding increasing obesity rates and which may bear
relevance to the kind of economic and trade policies
which may be used to address nutrition‐related
diseases. These propositions are:
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International trade lowers food and diet costs.
Energy dense foods and diets costs less
relative to nutrient‐rich foods and diets.
Consumption of energy‐dense foods and diets
increases as income declines and therefore
low‐cost, energy dense diets may contribute
to overeating by the poor.
The recent significant increases in global food
prices may increase the likelihood that poor
consumers will purchase energy dense diets,
thus further contributing to the growth of
obesity in the developing world.
The following is a summary of their findings:
Proposition 1: World Trade has reduced the
relative costs of dietary energy.
World trade has influenced the cost of energy
dense foods. While trade is rightly credited with
allowing the more efficient production of goods
and services, it has also affected changes in
economic organization that have reliably driven
consumers towards the purchase of energy‐dense
processed foods. Viewed in the context of
consumer choice, when a consumer chooses food,
he or she is constrained by income, the availability
of time (to prepare and eat meals) and
information (pertaining to the availability,
preparation and effects of particular foods on
health). These constraints are inextricably linked
in a market economy. Any change in the relative
cost (or price) of anyone of these factors is likely
to induce changes in the consumption of the
others.
Trade‐driven factors have reduced the relative
cost of dietary energy in the developing world in
four key ways: (i) the dramatic expansion of trade
in the inputs to processed energy‐dense foods
(refined grains, sugarcane and corn sweeteners
and vegetable oils) (ii) urbanization (iii) foreign
direct investment and (iv) rising household
incomes.
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery
(CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments
germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate
and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy
developments of currency and importance to the Caribbean.
http://www.crnm.org

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The most direct effect of international trade on food
and diet is probably via the stimulation of
technological innovation and production of vegetable
oils and sugars and promotion of exports of these
products through direct subsidies, credit guarantees,
food aid and market development programmes.
Global availability of corn, palm, palm kernel,
rapeseed, soya bean and sunflower oil surpassed 100
million tons by 2005, more than twice the amount
produced in 1995 and more than 13 times the world
production in 1961.
Technological advances in oil‐crop yields and refining
practices have greatly reduced the price of vegetable
oils relative to meat or fresh produce and
technological breakthroughs in the development of
high‐yield oilseeds and in the refinement of high‐
quality vegetable oils have further reduced the cost
of baking and frying fats, margarine, spreads and
salad and cooking oils.
Global production of caloric sweeteners and their
export has also increased over the past several
decades. Sugars derived from cane, corn and sugar
beet account for a progressively higher percentage of
energy in the global diet. Until recently the world
price of raw and refined sugars had shown a steady
decline and according to some analyses of food
balance data sweetener consumption by lower
income countries has increased the most.
Urbanization: Trade between countries is
advantageous because it allows for specialization in
productive activity. In practice, however, this leads to
employment of unskilled labour moving from
agriculture to manufacturing, which in turn implies
migration of workers from rural to urban areas.
Physical access to healthy foods tends to be more
limited in poor urban areas.
Foreign Direct investment: FDI into food processing
increases the availability and lowers the costs of
highly processed foods.
Rising incomes: trade liberalization has
contributed to economic growth and rising
income in developing countries. However, the
rise in income has led to the displacement of
traditional food cultures in favour of energy‐dense
processed foods. Moreover, as income rises the
tendency is for the share of income spent on food
to decrease, a principle in economics referred to
as Engels law.
Proposition 2: Energy dense foods and diets cost
less; nutrient‐dense foods and diets cost more.
Several studies point to a negative correlation
between energy density of food and energy cost.
Monsivias and Drewnowski (2007) in 2006, using
prices in supermarkets in Seattle, observed that
fats and oils, sugar, refined grains, potatoes and
beans provided the lowest cost dietary energy.
Energy cost of vegetable oils and sugars was less
than$1/MJ, whereas the cost of fresh produce
was ten times as much. The energy cost of
sweetened beverages was much lower than the
cost of fruit juices or fresh fruit and the
differential in energy costs of lettuce and lard was
several thousand percent. The same results were
obtained in 2000 using food prices in France.
Refined grains, added sugars and fats were the
lowest cost sources of dietary energy, whereas
the more nutrient dense foods were associated
with higher energy costs per MJ.
If healthier foods cost more per unit of energy, it
stands to reason that healthier diets would also
cost more. Two main conclusions have arisen
from observational studies relating to dietary
energy density to energy costs. First, lower
energy density is associated with higher energy
costs and therefore energy dense diets costs less
than low energy density diets. Second, higher
nutrient density (which is used as an index of diet
quality) is associated with higher energy costs.
The studies revealed that the lowest cost diets
were energy dense but nutrient poor. Although
these studies were not undertaken in the
Caribbean it may not be unreasonable to expect
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery
(CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments
germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate
and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy
developments of currency and importance to the Caribbean.
http://www.crnm.org

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similar results for analyses of energy and diet costs in
the Region.
Propositon 3: Consumption of energy dense foods
and energy dense diets increase as incomes decline.
Consistent with Engels law, referred to earlier, there is
evidence that the share of income spent on food
increases as income rises. The drop in food spending
is disproportionately greater than the drop in spending
on other goods. At the same time there is evidence
that the proportion of disposable income devoted to
food is greater for lower income families than it is for
higher income groups. In the United States, for
example, evidence is accumulating that lower income
families select lower cost but more energy‐dense
diets. The same is likely to be true for most Caribbean
countries. Added fats and sugars account for a
significant share of daily energy intakes and average
diet composition has moved towards lower costs
foods – driven by changes in production technology,
income distribution and relative prices. The
consumption of fruits and vegetables has not kept
pace with increases in daily energy intakes and fruit
and vegetable consumption tend to trend towards
consumption of lower costs fruit and vegetable
servings.
Lower income families tend to economize by buying
lower‐cost vegetables and fruit, cheaper cuts of meat
and more cereals, added sugars and added fats.
Consumption of whole grain, lean meats, fish and
fresh vegetables and fruit tend to be associated with
income.
Drewnowski et al posits that low‐income families
struggling to buy food in the face of budgetary
constraints would be driven towards more energy
dense foods. As such energy dense foods tend to
satisfy the economists criteria of an inferior good, that
is, a good consumption of which decreases with
increasing income.
Proposition 4: Low‐cost, energy‐dense diets
contribute to obesity among the poor.
This proposition rests on the assumption that obesity
is cause by consumption of low‐cost, energy‐
dense foods. Economic studies tend to link rising
obesity rates to the lower costs of all foods and
the increasing costs of physical activity relative to
other goods. However, when the analysis is
undertake by socio‐economic strata it becomes
evident that obesity rates are not equally
distributed across all segments of society and diet
quality and cost shows variation by social class. In
fact, the burden of obesity appears to fall
disproportionately on population sub‐groups with
the most limited economic means and groups
most at risk for obesity spend the largest
proportion of disposable income on food. In the
US, whereas the affluent lean may spend no more
than 7% of income on food, the obese poor spend
in excess of 25%. For the low income families, the
only way to meet daily caloric needs might be
through the purchase of nutrient‐poor, energy
dense processed foods.
Proposition 5: Rising global food prices could
lead to increasing global obesity rates.
Food prices have experienced significant increases
in the past few years primarily because of
increased in the real price of most agricultural
commodities because of the rising price of crude
oil and profound volatility in the price of refined
grains, vegetable oils and sugars. The view that
such price increases would result in a decline in
global obesity rates is incorrect. Economic theory
suggests that faced with scarcity and rising costs,
consumers might well consume more energy‐
dense foods and diets as food prices rise, and not
less. Incidentally, the same argument could be
made when a tax is placed on energy dense foods
to discourage consumption.
As the price of food increases in response to rising
costs of inputs, (or in response to an increase in
taxes) economic theory identifies two responses
to the price change. First, consumers of the good
will tend to shift away from the more expensive
product towards less expensive substitutes. An
effect referred to as the substitution effect. The
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery
(CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments
germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate
and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy
developments of currency and importance to the Caribbean.
http://www.crnm.org

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substitution effect is always positive, meaning that the
consumer will always tend to buy less of the good as a
result of the price increase. At the same time, the
consumer is also faced with less spending power as
real income as fallen and would therefore seek to re‐
allocate expenditures just as if actual income had
fallen. This is called the income effect. The income
effect may be either positive or negative since the
price increase may lead to either an increase or
decrease in consumption of the good whose price has
risen. The fall in real income may actually cause the
consumer to re‐allocate expenditure from other goods
in order to purchase the good whose price has
increased.
There appears to be some evidence that energy dense
foods are examples of goods for which consumption
increases as real income falls among low income
groups. In other words, low income families tend to
re‐allocate expenditure from other goods, including
higher cost nutrient‐rich foods, in order to afford the
lower cost energy‐dense foods whose prices have
risen. In such a scenario, the rising price of energy‐
dense foods, either through the imposition of taxes or
from general increases in the cost of inputs may not, in
fact, lead to reduced consumption of these foods. In
fact, such price increases may have the reverse effect
and contribute to lower consumption of quality foods
in an effort to afford the lower costs energy‐dense
foods.
In light of these propositions what are some of the
policy options available to Caribbean countries to
encourage improvements in the overall quality of the
diet and reduce dependence on low‐costs energy
dense foods/diets.
 Encouragement of domestic production of
suitable alternatives to imported foods. This
can be facilitated by making use of the
incentives provided for in international trade
agreements, including the domestic support
measures in the Agreement on Agriculture and
the programmes of co‐operation in trade
agreements such as the EPA.
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Reliance on border control measures such as
import duties. While the net impact of a tax on
food prices may be indeterminate and affects
income groups differentially, selective use of
these measures can succeed in influencing
consumer choice and serve as an incentive to
domestic production. Note that under existing
trade rules the use of import licenses and
quantitative restrictions to control import
volumes are not acceptable except under
extreme circumstances and so they are the
exception rather than the rule.
The impact of trade and economic policies
would be most effective when coupled with
widespread consumer education and
aggressive
marketing
policies
and
programmes. Consumer education should
extend to the school curriculum at all levels
and should also target more vulnerable
groups, such as low‐income families.
Incentives to domestic production should not
be limited to price incentives. Equally
important are information, infra‐structural and
institutional support including organization of
producers into viable economic enterprises.
Promotion of and support to research and
development; support to innovation and
protection of intellectual property pertaining
to food products are important in the policy
mix.
Special and Differential Treatment Provisions
in trade Agreements to mediate the impact of
liberalized trade and foreign direct
investments on domestic food production and
food security. CARICOM has consistently
encouraged the exclusion of most agricultural
products
from
tariff
liberalization
commitments. This, however, needs to be
done selectively so as not to deny access to
high quality imported products which may not
be available locally or which could only be
produced at exorbitant costs to consumers.
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OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery
(CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments
germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate
and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy
developments of currency and importance to the Caribbean.
http://www.crnm.org