• Food policy

Food policy

The World Trade Organisation (WTO) sets the rules for trade among countries. As the rule setting body, it would seem reasonable to expect the WTO to specify how nations are allowed to react during a “food crisis”. This brief states that the WTO does have rules governing what members must do when they impose trade restrictions in response to higher world market prices. However, the paper deems that these rules are very weak and impose few constraints on what a member is allowed to do.

When world prices increase it is a signal that producers should produce more, and consumers should restrict consumption. The policy instruments of the WTO are mostly not a problem in the “high price” environment. Domestic counter-cyclical price support policies will be activated as prices go up. However, a different set of policy responses are problematic. Export ban is likely the most extreme policy response. Export bans on rice by several major rice exporters resulted in world rice prices increasing more than they would have in the absence of the bans. In addition, the announcement of an export ban by a significant exporter is a signal of a food shortage. Therefore, it can result in panic buying both in the home country and abroad, making a bad situation even worse. Moreover, the brief also mentions the following problematic polices:

• export restrictions: they are partial bans and have the same market effects as a ban, but the negative effects are somewhat muted
• export taxes: they can also be used to restrict exports, and from a taxpayer’s perspective, they have the advantage of raising revenue
• lowering applied tariffs: it is another policy response often used by developing countries in a high price environment

Furthermore, the brief notes that the negotiations in the Doha Development Agenda have also resulted in a new set of rules. The target of the new rules is to discourage countries from using food aid as a disguised export subsidy.

In conclusion, the paper deems that there is still time to make a start on developing better rules about export barriers in the context of the Doha Round. The rules have to cover export prohibitions, export restrictions and export taxes; and they must be capable of serving the world better in times of shortage. A first step would be effective disciplines on the use of export taxes, and export restrictions and bans.

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