Successful global agricultural trade hinges on open, secure agricultural markets. Such markets provide risk management by allowing for inter-regional diversification of crops and food products and by reducing price differences through market integration. In other words, secure, well-functioning markets can balance one country’s food deficit with another’s surplus, and vice versa. In this way, global trade can support global price stability and food security.
However, certain agricultural trade policies can hurt global price stability. This occurs when protectionist policies, such as agricultural tariffs and export restrictions, are enacted to try to insulate a country’s domestic prices from world market fluctuations. Such policies can actually amplify natural fluctuations in world prices because of their unilateral, uncooperative nature. While they may be domestically politically expedient, protectionist policies often exacerbate existing price volatility and can lead to an increase in food insecurity, particularly for vulnerable developing nations.
With the world once again facing the specter of a global food crisis, efforts to limit and regulate such unilateral policies are more important than ever before. IFPRI Research Fellow David Laborde has extensively studied such efforts, with particular focus on the ongoing Doha Development Round. His research provides important recommendations for stabilizing both world and domestic prices, including instituting an export restriction permit system similar to that seen for pollution/emissions permits.
To learn more, please read a brief overview
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| A_brief_overview_of_Foodsecurity_and_Trade.pdf | 173.52 KB | |
| DiscussionPaper_OnTheRoleOfExportTaxes.pdf | 695.14 KB | |
| DiscussionPaper_OnTheRoleOfTariffBinding.pdf | 183.35 KB | |
| Slides_OnFoodSecurityAndTrade.pdf | 1.32 MB | |
| DiscussionPaper_OnTheStateOfImportTariffs.pdf | 5.09 MB |
3 Comments
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We should not neglect three important aspects of the story:1- The Doha Round is not a wild adventure to free trade. It does not ask least developed countries to open their markets when developed countries maintain high level of subsidies for their farmers. This is exactly the contrary. The DDA will bring more constraint on future farm policies for developed economies without asking new efforts for LDCs. More important, on their own, Least Developed Countries will continue to be victims of unilateral policies (subsidies, export restrictions) of larger economies and they have not the economic power to retaliate or the money to implement domestic safety net needed to protect their vulnerable population. Therefore, it is critical to achieve progress in global governance with fair disciplines based on rationale analysis and this is what the WTO is about.
2- At the same time, we should not have an angelic view of trade negotiations and market access issues will not solve the problem of many poor and vulnerable countries. This has been pointed in many IFPRI research ( see http://www.ifpri.org/publication/development-promise ) where we show that LDCs can lose from ongoing negotiation modalities. We need to make additional efforts to be sure that LDCs will gain something for the Doha Round and address their specific needs through aid program (including aid for trade).
3- When prices are high, farmers (poor and rich) enjoy higher income and at the same time consumers are hurt. When prices are low, the reverse situation takes place. There is no "right" price for food. Undistorted markets will give you the "efficient" prices. This price in many cases do not satisfy policy makers. For instance, using tax payer money , rich country governments have decided to decrease the food price for poor consumers, with policy as food stamps, and increase the income of their farmers with subsidies. These policies have feedbacks on world markets. But for many poor farmers and consumers in the world, what happens on world markets affect them with different magnitude and sometimes they may only perceive their negative aspects. Many market and policy failures (middlemen, transaction costs, asymmetry of information and hectic policies) lead to large differences between world and domestic prices, potentially increasing the cost and reducing the gains of more integrated global markets. Understanding how prices are transmitted is a critical part of the research agenda to define well targeted recommendations (see the discussion on price transmission in http://www.foodsecurityportal.org/assessing-impact-increased-global-food...)
Dear Tobias, Your comments
Dear Tobias,
Your comments address several key issues. It is true that many governments jump too quickly from “food security” to “self sufficiency”. This confusion is a source of many difficulties we face to promote a more integrated and efficient international agricultural markets. The point of view of policy makers is not unreasonable but it is based on two biased assumptions.
First, they assume that they have better control on their domestic producers, and they can control the domestic supply, in a better way that foreign producers and international markets. This approach has several limits: in some countries, we see that “agricultural lobbies” have more control on policy makers than the reverse; in other countries, if the government has real capacity to control their farmers and their production, it leads to strong negative incentives for private investors (they do not like that governments act to manage their production or limit price increases when the markets will have acted otherwise).
Second, no countries can really hope to develop a food security strategy based on autarky. Weather events, political instability, pest and diseases affecting crops or animals, even earthquake (or nuclear contamination…) can strike any country in the world. During this “domestic” crisis, countries need to rely on world markets. Now, we are in a tricky situation where many countries would like to use the international markets when they need it, and avoid relying on them the rest of the time. But this approach could not work: we need healthy global and regional markets working on a daily basis, with as many actors as possible (and diversified exporters), to be sure that they are here when a country need it.
Last, you raise also the important issue of improving farmers’ income and investment possibilities through trade. To achieve food security in the context of a growing world demand, but also to have a better distribution of production between developed and developing (and among developing) countries, we need large investment to improve productivity. At the farm level, it clearly implied that farmers get a better rate of return of their efforts and removing distortions will be important, as well as allowing them to produce high value crops (and not to force them only in staple goods). At a larger level, R&D expenditures to develop new varieties are more and more important and it will involve to have access to global markets to achieve the economies of scale needed to make them profitable.
Let’s hope that making these points clear we can convince policy makers to understand that food security will not be achieved by looking at solution within their borders alone, and that trade is a key part of the story. Now, having a healthy trading system could not be achieved only through unilateral decision: global and regional governance and coordination is needed.
Food Security and Regional trade
The study by Laborde is quite valuable on the possibilties of achieving food security using trade for high value crops. In recent years the tendency has been to focus on food security through domestic production. But low rates of productivity for food crops due to lack of yield enhancing technologoies including seed, fertilizer and irrigation equipment has meant that countries still continued to import food even with the inward-looking food self-sufficiency strategies for achieving food security. The issue now is how to convince governments especially in the economic sub-regions of Africa that they can benefit more through regional integration, allowing private sector to invest freely in high-value export crops, and relaxing import requirements for farm inputs and for importing food from food from surplus countries. In short how can we convince governments that this approach for achieving food security is less costly and less risky? Tobias
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