Globalization is characterized by the opening of domestic markets, together with an accompanying increase in international trade, financial services, spatial reorganization of production and a constant quest for comparative advantage and competitiveness, which makes technological innovation of great strategic importance.
What is more, market liberalization makes it necessary to bring existing national regulations into line with certain international regulations, standards and measures; such as sanitary, phyto-sanitary and food safety measures. These are discussed and agreed principally in the World Trade Organization (WTO) and the Codex Alimentarius Commission.
Agricultural and agro-industrial sectors must be seen as part of a system within which they interact closely with other production and service sectors. This broadens the vision of agriculture and recognizes the importance of economic and production activities that take place outside the primary production process, as well as highlighting the impact of the political, environmental and social environment on these activities.
There are a number of advantages and drawbacks to a system-based approach.
Among the advantages, it:
- provides a broader vision of the environment in which agricultural institutions operates;
- highlights the linkages between the actors involved in the system;
- helps to identify gaps, coherence and contradictions between policy instruments;
- helps to characterize constraints in the system’s various components and reveal their influence on the remaining components;
- Makes it easier to pinpoint strategic actors capable of becoming dynamic hubs within the system.
The main drawback of the system-based approach is that, being a macro concept, it is more complex to analyze. This situation calls for new types of linkages to be developed between institutions capable of integrating and coordinating the:
- i) public/public;
- ii) public/private, and
iii) private/private, activities and alliances that can be found throughout a system.
The systems concept applied to the agro-food sector
In the past 30 years, there have been unprecedented changes in various components of world agriculture as a result of globalization; including changes in consumer demand, the advent of new technologies and the need to preserve land, water and biodiversity. Consequently, agriculture in the late twentieth century came to be viewed as a complete system, going beyond the traditional production-centred concept. There are a number of different definitions for an agro-food system. For example, an agro-food system can be defined as a set of activities which combine to make and distribute agri-food products, and consequently act to meet human nutrition needs in a particular society. Another concept developed in the late 1950s, closely linked with the above concept, is that of “agribusinesses”. These are defined as: “the sum total of all operations involved in the manufacture and distribution of farm supplies. These consist of production operations on the farm, and the storage, processing and distribution of farm commodities and items made from them.” An agro-food system is considered to exist where the following conditions apply:
- There is a set of components (input-supplier, agricultural, commercial, agro-industrial, distribution and consumption components).
- There are linkages between these components and their environment (support, technical and financial services: production services, policy instruments and their impact; the environment).
- There is a common objective (to supply products that meet the needs of different consumers, taking into consideration economic, social and environmental factors).
- Where changes occur in one component (prices, supply, quality, regulations, etc.) they impact on all the others.
Agricultural institutions can be positioned within different links in the chain, depending on the activity they carry out: i.e. primary production, the manufacture of intermediate products, or agro-industry. Agricultural institutions has a series of linkages with suppliers of inputs, machinery and equipment, and with technical and financial service providers. In turn, underpinning these linkages is a macro-environment defined by an international context. Nowadays, this tends to take the form of trade agreements concluded between various countries. There is also a national context determined by sectoral or macroeconomic policies (including policies for tax, tariffs, credit, investment incentives, and science and technology). Significantly, the environmental component is part of any agro-food system because of its importance for the agricultural and agro-industrial sectors, which both have close ties with the management of natural resources. As a result of concerns over this issue in recent years, a growing number of rules and requirements have been introduced, some of which have been imposed by markets themselves. This has led to the development and implementation of approaches and methodologies such as “clean technologies”, “good manufacturing practices” and “good agricultural practices”, amongst others.
International trade agreements establish conditions of market access for products. Nowadays, virtually all countries are engaged in negotiating or implementing free trade agreements (FTA) among different members of regional integration blocks, or with countries outside the region. The main points of such agreements concern: tariff schedules, import quotas, production incentives and intellectual property. A few key elements for international competitiveness, such as subsidies and sanitary and food safety agreements, are discussed and agreed within the World Trade Organization (WTO).
This context depends upon each country’s specific social, political and institutional system. In addition to the above elements of macro-economic policy, there are other factors which define the domestic context. These include:
- institutional constraints and opportunities such as fragile public and private organizations and the narrow-minded visions of ministries and other support institutions;
- ii) income levels, and
- iii) the level of education. The quality of – and access to –communications and basic services also impacts on the type and quantity of food demanded by consumers.