Kym Anderson comes with an interesting piece about the partnership between trade distortions and food prices. He argues that an unexpected rise in global food prices are powered by major plan shifts like tariffs and subsidies, leading to a tit-for-tat behavior by countries that produce them. Trade-related policies contribute to agricultural market volatility and the volatility across the long-run-trend terms of trade slows national economic growth, he argues.
The main point of the piece: continue with agriculture liberalization. This is a similar debate. The disagreements on agriculture liberalization has been supporting Doha for eight years now. The author says that the greater barriers in this sector, the greater volatility. So, seeking a particular Safeguard Mechanism (SSM) is not good to reduce volatility. But, how does the Doha Round pass without handling these issues? The price hike of 2008 was also a consequence of policy changes in America and EU partly, namely their decision to subsidize biofuels and set mandates/targets for his or her use domestically in response to rising fossil fuel prices.
It led other government authorities to impose food export limitations to insulate relatively their consumers from the purchase price rise, which pressed international food prices higher and even, domino-like, drove more exporting countries to check out the suit. Some food-importing countries reduced briefly their transfer tariffs also, to lessen the rise in their local food prices. The parallel movement of food and energy prices is consistent only after the previous half-century.
Governments of several developing countries harmed their … Read more