Global trade in livestock: benefits and risks to developing countries

International trade in livestock and livestock products is a major business, particularly as it accounts for almost one sixth of all agricultural trade. Meat exports, derived mostly from cattle, pigs and poultry, make up about half of all livestock products, most of which is traded by developed countries. Consumption of livestock products in the developing world is expanding rapidly however, presenting new market opportunities for both exporters as well as domestic producers. But the barriers to breaking into lucrative markets - local, regional and global - remain high. Since livestock are often especially important to the livelihoods of the rural poor, such barriers can frustrate efforts to reduce poverty.

A recent report from FAO has considered the impact of non-tariff barriers on developing countries' access to the global livestock market, currently worth US$33 billion annually. As the report title* implies, it is largely a question of balancing risks and benefits.

Live animals, meat and livestock products can carry pathogens, which are a significant risk to the health of both animals and humans. Such transboundary diseases can cause enormous damage in importing countries: the costs associated with the 2001 foot-and-mouth disease outbreak in the UK were estimated by some to be more than US$15 billion. Measures to reduce the risk of transboundary disease transmission are essential but the rules that govern global livestock trade - set out in the WTO's SPS (Sanitary and Phytosanitary) Agreement - are widely recognised as heavily biased in the interests of developed countries. Consequently, participation by developing countries in setting standards is very limited. Also, the SPS Agreement is so complex that it is difficult even for developed countries to keep abreast of its requirements; for the less developed nations the challenge can be overwhelming.

Success despite handicaps

Despite the far from level WTO playing field, the FAO report highlights a number of examples where developing countries have succeeded, apparently despite handicaps, in exporting their livestock products. Identifying the factors associated with these successes, the authors conclude that successes tend to be driven by strong private sector partners, who provide capital, management and entrepreneurial flair. Most of the successes were with products rather than live animals, and with those that had developed strong brand identities, which have become synonymous with quality, safety and dependability. Also, many were vertically integrated systems, incorporating small and medium-scale out-producers.

Similar achievements can be observed in the horticultural export trade successfully practised by several African countries, notably Kenya. Despite the need to adhere to increasingly rigorous standards, 70 per cent of fresh vegetable and fruit exports from Kenya are still sourced from smallholder farmers. Further, a shift to value-added products, such as semi-prepared and packaged vegetables, has allowed Kenya to achieve considerable growth in both volume and margins in recent years.

However, the FAO report raises a number of interesting questions. For example, how can the poor best participate in livestock commodity value chains? Should they remain small-scale producers, perhaps linked to large-scale processors through out-grower schemes? Or would they earn better incomes and be exposed to less risk by accepting employment opportunities created by large-scale businesses?

Future opportunities signposted

The recognition that many of the success stories in the livestock sector concerned products rather than live animals is significant. The risks associated with processed products, where the treatment destroys any potentially harmful pathogen, can be very different from the risks associated with live animals. Yet, under existing trade rules this difference is largely ignored. The report calls for rigorous research to enable better understanding of the risks posed by different livestock commodities, and for science-based measures to be developed to mitigate risks to the satisfaction of importing countries, so opening up export opportunities.

Whether animal welfare issues represent a threat or opportunity to developing countries' participation in global livestock markets is an intriguing topic. Many northern supermarkets - more recently some in South Africa also - market premium-priced 'welfare enhanced' products: meats and eggs produced in less intensive systems. Although developing countries usually place less emphasis on animal welfare per se, their more extensive production systems provide for greater freedom of movement and opportunities to express their normal behaviour, and should appeal to ethically minded consumers. The report suggests that evaluation of the livestock production systems in developing countries could pave the way for the introduction of premium-priced, welfare enhanced brands for them to export.

In conclusion, a realistic evaluation of the risks associated with livestock products combined with more effective participation by developing countries in standard-setting bodies, could open the way for poorer countries to enjoy the same levels of benefit from international trade in livestock products as some already enjoy from the booming horticultural export sector.

* 'An appropriate level of risk: Balancing the need for safe livestock products with fair market access for the poor.' FAO-PPLI Working Paper No. 23 FAO, Rome. Brian Perry, Alejandro Ninn Pratt, Keith Sones and Christopher Stevens (2005)

Written by Keith Sones