Trade policy responses to food price volatility in poor net food-importing countries

This paper provides an evidence-based assessment of the trade-related challenges that poor net-food-importing countries have faced since Marrakesh, and the useful measures that can be done.

The paper notes that the capacity of food import-dependent countries to access supplies is adversely affected by tight food supplies, higher food prices and increased food price volatility. In additions, these countries’ share of food imports to total merchandise exports is very high even under normal years, and the imperative of importing food comes at the expense of capital goods, among others.

Useful Suggestions include:

• lowering or eliminating import tariffs is usually the most recommended measure; nevertheless, this option is severely limited when applied tariffs are already low
• net food-importing countries should be enthusiastic proponents of approaches in strengthening WTO rules on export prohibitions and restrictions
• Stockholding and domestic food assistance offer vulnerable countries some degree of protection against domestic and external shocks; however, cost considerations represent serious limitation
• quick improvements can be made by reducing transaction costs which is an important mitigating factor in containing price volatility
• among the recommended measures are those mentioned in the Marrakesh Decision, including food aid, export credits, compensatory financing and assistance to increase agricultural productivity and infrastructure
• using the flexibility in WTO’s agreement of Agriculture to invest in food production and resilience, and rationalising biofuel policies are also recommended