Did trade-policy responses to food-price spikes reduce poverty?
Kym Anderson, Maros Ivanic , Will Martin03 August 2013
Food prices in international markets have spiked three times in the past five years. Most governments responded by altering trade restrictions to insulate the domestic market. Did this work? This column presents new research suggesting that altering trade restrictions has less impact than is commonly thought. Since there are other options – such as conditional cash transfers – that could better, more efficiently and more equitably protect against poverty, it is time we sought a multilateral agreement to desist from changing restrictions on trade when international food prices spike.
Food prices in international markets have spiked three times in the past five years: in mid-2008, early 2011 and mid-2012 (Figure 1). The first prompted urban riots in dozens of developing countries when rice prices more than doubled. It may even have contributed to the unrest that led to the Arab Spring.
Figure 1. Monthly real food price indexes in international markets, 2000 to June 2013 (2002-04 = 100)
Using water resources efficiently on a global scale
Peter Debaere22 August 2012
As droughts, record temperatures and high crop prices remind us, the world’s water supply is not co-located with the world’s water demand. This column takes a factor-abundance trade-theory approach to the problem and suggests that open markets that make specialisation of production possible may offer a way to fight water scarcity.
As the severe drought in key US farming states continues, worries mount over rising food prices. This recent drought is but one of many events that underscore how freshwater scarcity will be a major challenge of the 21st century. Almost one fifth of the world’s population currently suffers the consequences of water scarcity, and this number is expected to increase (UNESCO 2009). Moreover, population growth, pollution, rising standards of living, and the diet and lifestyle changes they imply will continue to increase the demand for water and strain available water resources.
The recent upward spike in the international price of food led some countries to raise export barriers. This paper provides new evidence on change in domestic and international food prices, compares it with responses during previous food price spike periods, and suggests stronger WTO regulation on export restrictions.
Nadia Rocha, Paolo Giordani, Michele Ruta09 May 2012
International food prices are on the rise and becoming increasing volatile, reaching crisis levels in recent years. This column argues that one overlooked reason for this is the rise in protectionist policies aimed at restricting food exports.
International food prices have been a key policy concern in recent times (Evenett and Jenny 2012). Figure 1 shows why. During the periods 2006-7 and 2008-10, international food prices shot up by well over 50%. If we compare these prices with those of the last two decades, the label ‘food crises’ does not seem overblown.
After several decades of quiescence, global commodity prices almost doubled in 2008 and, after a brief fall, rose again in 2011. The papers in this new CEPR eReport aim to identify and assess the importance of the factors responsible for the recent increases in the levels and volatility of commodity prices.
Soaring food and fuel prices: Their impact on public finances and other causes of persistently high consumer price inflation in North African and Middle Eastern countries
Marga Peeters, Ronald Albers23 February 2011
World food prices are now even higher than their peak just before the global crisis. During periods of high commodity prices, North African and Middle Eastern governments have a long tradition of subsidising food and fuel products. But this column shows that food price inflation and consequently subsidies were also high during periods when global commodity prices were falling. Now these countries have an opportunity to correct this.
Just before the global crisis struck in September 2008, food and fuel prices soared, pushing up inflation in most countries (see for example, Tangermann 2008 and Conceição and Mendoza 2009 on this site). The impact was particularly large in North Africa and the Middle East (such as Algeria, Tunisia, Libya, Egypt, Israel, Jordan, Palestinian territories and Syria) where food constitutes a large share of consumer spending.
Rising food prices once again pose central banks a tricky question. How far should they ignore food price inflation? This column suggests that food tends to have stronger predictive power on global inflation cycles than oil. The problem is more severe in emerging markets where consumption basket weights for food are two or three times larger than in rich nations. Central banks should pay close attention.
The uneven recovery in advanced countries is hiding an issue that, while off the agenda in the last G20 meeting back in November, is arguably no less urgent for the global economy – namely, the rise in food prices.
The contributions in this latest book from CEPR and the World Bank review trends in international prices and trade patterns of key food commodities, and assess the incidence of food price changes in a number of developing countries using household level data on sources of incomes and consumption patterns.
Reducing trade distortions could ease food price volatility
Kym Anderson13 November 2009
Global food price volatility is costly. This column argues that most food price spikes are driven by major policy shifts, such as tariffs and subsidies, which result in harmful tit-for tat behaviour. It makes the case for completing the Doha round to further restrain WTO members’ unilateral actions.
Every decade or two, food becomes newsworthy globally. Mostly it is because of a price spike, either downwards (hurting farmers in open economies, as in 1986) or upwards (hurting food consumers, as in 1973 and 2008).
Most such price spikes are a consequence of major policy shifts, since demand does not change rapidly and local weather-induced supply shocks tend to offset each other in a many-country trading world. In 1986, for example, it was the food export subsidy war between Western Europe and the US that drove real international food prices to their lowest level since 1930.
Are policymakers better equipped for the next food price crisis?
José Cuesta07 August 2009
The food crisis caught some policymakers off guard. Will they be ready next time? This column argues that most studies of the crisis offer little in the way of tractable policy responses. This knowledge gap leaves policymakers unprepared to prevent or mitigate the next food price crisis.
It is extremely difficult to predict when a crisis will start or end. Even though there might be a consensus regarding its causes (Abbot et. al. 2009), there is typically less agreement on which one(s) dominate(s) and, consequently, which measures will effectively tackle them. That applies to crises from the global financial panic to swine flu and certainly includes the food price crisis.