Sit Down at the Ballgame: How Trade Barriers Make the World Less Food Secure

Abstract

This paper analyses the impacts of trade policy responses to rising world food prices by carrying out a series of stylised experiments in the wheat market using a world trade model, GTAP. The sequence of events that is modelled comprises a negative wheat supply shock and subsequent implementation of an export tax by a major net exporter and a reduction in import tariffs by a small importer. The effects of trade policy responses are contrasted with those of full liberalisation of the wheat market. At the core are the (opposite) effects on producers and consumers, as well as the terms-of-trade and trade tax revenue effects. Food security is shown to depend crucially on changes in prices but also in incomes that are associated with changes in factor returns. The results reveal that major net exporters are generally better off when implementing export taxes for food security purposes. Large exporting countries export price instability causing world food prices to rise further. Net importing countries lose out and have limited leeway to reduce tariffs or subsidise imports. Liberalising wheat trade mitigates rising prices and contributes to food security, but to the detriment of production in Africa and Asia, making them more dependent on and vulnerable to changes in the world market. Concerted action at the WTO forum is required, notably clarifying and sharpening the rules regarding export measures.