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April 24, 2020

COVID-19: Trade restrictions are worst possible response to safeguard food security

Leo Mahambe Articles, Industry News

COVID-19: Trade restrictions are worst possible response to safeguard food security

As COVID-19 spreads around the globe, fears of a deep global recession are mounting. Some also fear that food supplies may start running short, especially if supply chains are disrupted. Others fear that agricultural production may be disrupted by containment measures that restrict workers from harvesting and handling crops.
Leo Mahambe
2020-04-24 11:02:25

While we should take these concerns seriously – especially for fruits and vegetables, which have complex supply chains, or foods sold primarily through restaurants – they should not be overstated either, especially not for basic staples such as rice, wheat and maize. Global markets are well supplied, stocks are healthy, production of key staples is unlikely to be disrupted and prices have remained relatively stable. Trade is allowing production to move from areas of surplus to areas of shortage, avoiding the drastic shortages and food insecurity associated with reliance only on local production.

But there will be serious threats to the access of the poor to food as a consequence of lost income from lockdowns and other restrictions. These should be addressed through measures that help maintain access to food, rather than through policies like export bans that may threaten that access.

The food price crisis of 2007-2008 shows, however, that policy concerns about food availability can easily turn into a serious price crisis. At the time, some countries responded by imposing export restrictions, which pushed up world market prices of staples, leading other grain exporters to also limit exports in efforts to insulate their consumers from the initial food price rises. Food importing countries worried about the higher cost of food, in turn, lowered import tariffs on food, supporting demand but keeping upward pressure on world prices. As a result, instead of containing price increases, these policy responses only drove world market prices higher. In the case of rice, these policy responses contributed almost half of the world price surge in 2007-2008.

Unfortunately, once again several countries are considering export restrictions. See our online tracker. Kazakhstan, for instance, has already suspended exports of several cereal products, as well as oilseeds and vegetables, until April 15. Vietnam is no longer granting rice export certificates through the end of March while the country reviews domestic inventories. These restrictions, even if temporary, seem entirely unnecessary. Both countries produce far more than they consume and have ample stocks. An export ban by two key exporters would limit global supply and will certainly push up world prices of staple foods if others follow suit.
How does the present situation compare with 2007-2008? Will we see a repeat of the same policy mistakes?

 

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COVID-19: Trade restrictions are worst possible response to safeguard food security

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