Trade Policy Coordination and Food Price Volatility

During food price spikes, food exporting countries frequently use export restrictions to insulate their domestic markets from high prices on the world market. Their use can be so widespread that the high levels reached by international prices could be seen as a consequence of these interventions (Dawe and Slayton, 2011), and the restrictions can be so stringent that they can lead to the near disappearance of the world market as happened to the rice market over nine months in 1973 (Timmer, 2010). Food importing countries also act: they decrease their tariffs to protect their consumers but when world prices are low, the situation is reversed and importers raise their import duties. In summary, in food markets, countries routinely adjust their trade barriers to insulate their domestic markets from international price variability (Anderson and Nelgen, 2012). The lack of commitment to leaving borders open can reduce trust in the world trade system and lead to costly policies. Importing countries that expect food exporters to restrict their exports in times of scarcity will move away from the specialization consistent with their comparative advantages in order to ensure greater self-sufficiency, or will carry expensive public stocks. For example, the current large-scale public interventions in the Asian countries, through which many countries attempt to achieve self-sufficiency in major staples, can be explained largely by their experience in the 1972/73 food crisis (Rashid et al., 2008).

Gouel, C. "Trade Policy Coordination and Food Price Volatility" Ferdi Note Brève B132, décembre 2015