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IMPACT OF TRADE POLICIES ON GLOBAL FOOD PRICES AND AFFORDABILITY
1. TRADE POLICY INSTRUMENTS AND FOOD MARKETS
Various tools in trade policy including tariffs, quotas, and subsidies are known to have an impact
on the global food prices and food accessibility. The imposition of tariffs also makes imported
food items expensive to the common consumer since they have to pay more to access them. For
instance, if a country like India, which is a major importer of foodstuff, increases import tariff on
edible oils then it becomes costly to consumers in that country. In the same way, the financial aid
offered by the developing countries to local farmers enable exporters to sell crops at cheaper
prices internationally. This has a positive effect of placing a downward pressure on the
international food prices, however, it also puts a limit to the ability of farmers in the developing
countries to penetrate international markets. restrictions on export flow put in place by food-
exporting countries during instances of high inflation or scarcity are also contributing factors to
the global supply and hence global prices. For example, restrictions on rice export, implemented
by India, Vietnam and other significant exporters in 2008 led to a sharp rise in the global rice
prices. Trade policies less only affect food price levels but also govern how volatile food prices
are and how much the domestic food prices are affected by global commodity prices. As for the
protection elements, such as import tariffs and subsidies that help protect domestic markets from
global prices to some extent, the availability of policy measures to address domestic prices when
there is a crisis situation is considerably limited. These goals which include domestic food
security, farmer income, and stable inflation rates require sound well-crafted trade policies.
Diplomatic trade negotiations and multilateral commitments; domestic policy priorities; and
trade liberalization and global developments affecting food production, demand and price all
have to work in harmony when applying the trade policy tools. Finding this balance is perhaps
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possible and can help in getting the best out of the trade policy Instrument in supporting
affordable and stable domestic food supply.
1.1. Tariffs and quotas on agricultural products
Most of the countries use tariffs and quotas to restrict importation of agricultural produce to
[protect their own farmers from competition]. Tariffs allow the government to increase the cost
of imported goods through an import tax while quotas provide a restriction to the number of
imported goods. Both policy instruments have been applied systematically in the past in
agricultural trade and can result in major effects on the global food prices and accessibility. The
effect of tariffs is commonly seen in the increase of domestic prices of imported food products
such as grains, meats and dairy products for the benefit of local farmers. However, this also has
negative effects to low-income consumers in that country in that it inflates the price of food thus
making it less accessible. Also, export tariffs that may be put in place in large producing
countries can act as a mechanism to increase world prices. For instance, some Asian countries
exercised export bans on rice in 2008 and this compounded the situation by causing a sharp
increase in the global price of rice in the same year. Similar to quotas, they maintain high
domestic prices by restricting the imports, However, their application is flexible. Rigid controls
on importation of basic goods also passes on world price signals during a period of tightness in
the global market such as the world food crisis in 2008. As such, although protective measures
such as tariffs and quotas may be in the interest of domestic farmers in the short-term, it
increases the price of food products which is disadvantageous especially to the poor. Reducing
the barriers to trade through lowering of tariffs and increasing of import penetration rates may
lead to a decrease in the world food prices. But, these governments have to balance pressures for
protecting the domestic agriculture industry. Nurturing these conflicting factors has always been
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a daunting task in managing the trade policies of agricultural commodities. There is a need to
promote more openness in trade which should be complemented by domestic measures to ensure
that consumers in different countries have access to cheap and nutritional food while at the same
time ensuring farmers in the same countries are able to make decent incomes.
1.2. Export subsidies and their market distortions
Agricultural export subsidies, which are financial incentives offered by governments to farmers,
aim to reduce export costs and increase export competitiveness in the export markets. However,
these subsidies have been anathema to the critics for skewing international trade and putting a
cap on world prices for some of the commodities. When an exporting country has offered its
domestic producers payments conditional on a minimum level of export business, this means that
those producers are able to export below cost or at artificially low prices. It provides the
exporters in the subsidizing country with a competitive edge over rivals in importing nations and
can crowd out the unsubsidized exports. In exporting countries, subsidies lead to low prices for
the exported goods and thus should increase demand more generally in importing countries.
However, if the subsidized exports capture a large market share in the importing country, then
this reduces the market share available to exporters from the other countries who are not
enjoying such subsidies, critics have often pointed out that subsidies lead to production
inefficiency on the part of exporting countries in two ways: more crop growing than what is
warranted by market prices. This type of operation where production decisions are made based
on the government policy instead of the market signals are considered to be inefficient. In the
long-run, the sustained oversupplying normally leads to the lowering of world market prices for
the subsidized crops. It’s hard for other farmers who are not subsidized in both importing and
exporting countries to be able to compete in the market prices. Critics argue that these dynamics
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aggravate food insecurity due to lack of investment and production in marginalized farming
communities that depend on exports, especially in the developing world. Toward this end,
agricultural interest groups argue that subsidies are needed to preserve the viability of rural
economies and maintain sufficient food stocks in exporting nations. However, countries that
provide large agricultural subsidies have been put under pressure in trade talks to eliminate
subsidies that distort production and trade in a way that can push out competitors in export
markets. Its future enhancement might be required to eliminate the subsidies that hinder the
efficient positioning of resources following the comparison of competitive advantages. Other
concerns also need to be taken into account when formulating export promotion policies,
especially its effects on the international markets and low- income food import dependent
nations.
1.3. Non-tariff barriers in food trade
Non-tariff barriers can be defined as trade barriers in the sense that they hinder the free flow of
goods between countries but are not in the form of a tariff or tax. Other notable examples of
NTBs in food trade include; Sanitary and Phytosanitary measures, Technical Barriers to Trade,
Import licensing measures, Export and production subsidies, and Rules of Origin measures.
Measures that are more stringent than the standards set by the relevant international
organizations, such as stricter maximum residue limits for pesticides, and more rigorous
inspection measures, improve sanitary and phytosanitary barriers for the food products
originating in developing countries which lack the necessary capacity and financial resources to
meet these requirements. Even where standards are voluntary, they can be difficult to meet due
to a range of technical barriers to trade including; testing and certification procedures; overly
complex labeling; and packaging rules can also present challenges particularly to small scale
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farmers/firms. Both sanitary and phytosanitary measures and technical barriers could be used
intentionally as disguised protectionism as well as may be used unintentionally to erect barriers
to trade as compliance becomes difficult for trading partners who may be in an early stage of
development of their regulatory and testing frameworks. Some nations also demand that their
traders must acquire import licenses for specific food products as a way of regulating the volume
or the time at which they allow imports. It should be noted that these licensing schemes create
additional administrative and regulatory loads on trade. Payments that some nations give to their
farmers to export and produce are known to trigger overproduction and they drag the world
market prices down hence affecting the unsubsidized farmers. Regulations on the origin of
products which prescribe that the imported foods must be sourced from and must have been
subjected to a significant processing in a specific country can also hinder trade. Combined, this
web of NTBs can cause immense difficulty in excessive regulatory hurdles and are particularly
difficult for developing nations to overcome when seeking to participate in global food systems.
They also suggest that if measures are taken to improve the coherence of the various standards,
product and process requirements, and customs formalities that regulate food trade, the trade
costs could be substantially cut, thereby bringing into effect a far more open, fair, and well-oiled
food trade world.
1.4. Domestic support measures for agriculture
Export credits are among the most influential trade policy instruments in the sense of affecting
food markets worldwide; however, a rather extensive subset of export credits are domestic
support measures that grant subsidies or similar financial assistance to agricultural producers in
their home markets. These support systems include price support through floor prices, coupled
prices that reflect the quantities produced by the farmers, subsidies on certain inputs, and
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compensation for disasters, all of which assist in maintaining producer incomes in view of price
fluctuations and adverse weather conditions. But it also encourages higher production that leads
to supply glut in the international market, thus reducing price levels. Similarly, tools like import
restrictions and tariffs help curb competition from foreign producers to support local industries.
This restricts the amount of relatively cheaper imports that could be imported into food-deficit
areas thus helping to bring down local food prices. For instance, the policies developed by the
developed countries such as Japan Europe and the United States have kept the prices of such
commodities as grains, cotton, sugar, meat, and dairy artificially low for many years. This is a
drawback in a way because it harms farmers in the developing world who cannot take advantage
of production subsidies. Therefore, the methods such as compensating the domestic producers
through administered pricing, input subsidies, public stock holding, subsidized credit have been
adopted by the developing countries. They may not be able to provide extensive support due to
some financial challenges they have. Also, the developing countries have a view that bias
towards subsidizing the developing country producers makes the latter to penetrate the market of
the former through cheap exportation. This accounted for developing countries call for
disciplines on domestic support in trade liberalization process. They say that restrictions on
subsidies will contribute to increased fairness of trade and higher prices in the world. But
developed countries argue that subsidies are necessary for non-trade socio-economic reasons
such as food security, employment generation in rural areas and nature conservation. Therefore,
the different positions and interconnections between government support programs and global
food prices, based on the contrasting and complicated relationship between the two, can be used
constructively by science-based measurements of policy effects on constructive trade
reforms. Additional information supporting its impact on the subsidies in production, trade, food
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deficits, consumer access and farmers’ livelihoods in different jurisdictions may enhance
understanding of trade-offs and guide reform for more efficient supportive changes in other
economic, social and environmental objectives.
1.5. Trade remedies and their application in food markets
Anti-dumping duties, countervailing duties and safeguard measures are trade remedies of policy
instrument to offer respite to the domestic industry affected by imported goods. These trade
remedies are relevant in the area of instability in the global food markets that are characterized
by volatility in cycles of supply and demand. Raw material entailing food items are the most
susceptible to import competition and volatility in global prices that may harm domestic
producers. They may include: Trade remedies can go a long way in such situations to stabilize
the domestic food markets. In the context of agricultural and foodstuff products, anti-dumping
duties are levied by investigating authorities where imported products are being sold below the
normal value, thus causing a serious impact on domestic producers of like products. CVDs are
used to counter subsidization which is practice by foreign governments to subsidize the exporter
of the subject goods. This means that while they are legal under WTO agreements, subsidized
imports can only harm domestic producers. Safeguard measures on the other hand, limit import
of a product regardless of whether it is dumped, subsidized or traded fairly through imposing a
temporary ban to allow a threatened domestic industry to recuperate from the impacts of
increasing inflows of imports. Despite the fact that the global food prices rise during food crises,
restrains countries from using export restrictions for humanitarian reasons. However, there are
instances where trade remedies can be justified in order to counter domestic market distortions
but their use can only be done so after a thorough analysis on the basis of standard provided by
the WTO agreements in order to justify the imposition of remedial duties. Subject to the
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application of remedy measures that are justified by economic arguments and where they are not
used with the clear aim of protecting domestic food industries, trade remedies can indeed avoid
long-term negative impacts on local food sectors due to, for instance, the unfair trade or import
surge of food products. As they alert exporters to observe fairness and engage in fair and
competitive price offer, the trade remedies, when exercised under sound rules and control
instruments, can help foster freer and affordable trade in foods that are essentials for the food
security.
2. ECONOMIC THEORY OF TRADE AND PRICE TRANSMISSION
Any strategies including trade policies and market interventions meant for securing food for the
domestic population can also affect food prices and accessibility at international levels, some of
the principles of economic theory help to understand how shifts in domestic policies are
transmitted through supply chains and factor markets to affect trade and world prices.
Comparative advantage theory suggests that countries should specialize to produce goods in that
they are most efficient and leave the production of other goods to other countries. Because
countries are able to import mix of goods they cannot individually produce, trade brings about
higher total consumption and hence welfare. The policies that control trade flows debar nations
from achieving these gains from specializing and exchange. Measures aimed at protecting
domestic consumers from soaring food prices in international markets may help contain high
prices at home but curb supply to the global market, thereby exerting upward pressure on prices
globally. Other potential benefits may be to maintain low consumer prices at the same time
deterring productivity improvement among domestic farmers and imposing a tax on local
consumers who buy imported foods. This occurs through the price transmission and adjustment
mechanisms within the value chain networks that exist between producers, traders, processors,
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and consumers nationally and internationally to determine how trade policy disturbances are
buffered. Hence while supply chains showing market power may delay in passing the price
changes they may do so only up to some extent and the changes therefore always happen with
some form of lag. The nature of transmission of negative trade policy shocks and that of positive
shocks meeting export demand spreads. Hunger and economic access to food are two
components of food security that comprise domestic food availability together with the ability to
purchase food based on employment, wages, and the cost of living. Economy liberalization
allows for the increase in buying power and specialization in production of goods and services
but on the other hand makes domestic prices volatile due to fluctuations in international prices.
Subsequently, trade theorists have suggested that, while sustainable trade and competition are
essential to enhance utilitarian productivity and affordability in the long run, certain forms of
market protectionism may be necessary to shield developing economies from instability in the
short term.
2.1. Supply and demand in international food markets
Supply and demand of food across the world: The prices of foods are globally traded foods
depend on the changes of the supply and demand conditions in the international market. The
field of price transmission across borders relies on the concept of supply and demand as the
foundational structure. If supply of foods that are traded globally falls at constant trade volumes
then either export measures, climatic factors or input constraints then the price increases to
balance the supply shortfalls against the trend in demand. On the other hand, the attempts to
increase production enough to create gluts in export markets at supported trade volumes, bring
down prices. Hence, economic theory would suggest that global food price variability directly
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mirrors the strength of supply side reactions to shifts in demand or demand side reactions to
supply change in world trade.
While population in the global scale and per capita income increases, the quantity demanded for
necessary food products with higher income elasticity increases. A Herculean increase in biofuel
processing driven by industrial policies also tugs global supplies and maintains the upward
influence of food crop prices. When production responses to these signals in the leading
exporting countries fail to meet the upturn in global demands, low levels of buffer stocks trigger
an upward effect. The food prices inflation especially in 2007-2008 can be seen as a result of
these market dynamics of demand growth far exceeding the technological progress in
agriculture. Likewise, exactly as in the case of LMCs, food price crashes emerge because of the
increase in export production of farm commodities when demand growth is insufficient, decline
in buffer stocks, and low nominal international farm gate prices. These dynamics in international
markets bring real global food prices into domestic prices, therefore affecting food affordability
rate, access, and utilization by the low-income consumers in the developing world, who majority
of their income is spent on foods.
2.2. Price elasticity of agricultural commodities
Price elasticity of demand for agricultural commodities as defined as the extent of change in
demand for crops and livestock products to price changes. Some of the key agricultural products
that are more or less sensitive to price changes are basic food crops such as wheat, rice, corn,
among others and are relatively price inelastic, especially in the short run. This means that even
if price goes up, the quantity consumption does not reduce significantly because basic foods
cannot be done without. However, the products of agriculture that fall under the category of
luxury, for instance certain fruits, green groceries and meats could be considered to be on the
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elastic demand. The degree of price inelasticity indicated for staple commodity crops serves
important implications for the analysis of international trade and the mechanisms of price
transmission across markets. In such an event, when a major exporting location such as North
America is faced with a situation that leads to a supply shock in terms of the crop production due
to weather conditions or any other factor that hinders crop production, consumer in importing
areas cannot absorb large quantities and thus the market does not achieve a new equilibrium
through the demand side. As a result, the international commodity prices may go very high and
the cost of imports will be transferred to the target foreign markets in a bid to secure enough
volume of imports. There is a view that if staple agricultural commodities demand was more
elastic, supply shortage and price rise in one region could be met with fewer demand reductions,
which could provide some balance via lower consumption rather than by prices and higher
import cost. The change varies for agricultural goods depending on the market’s degree of price
elasticity.
2.3. Spatial price equilibrium models
Location based price equilibrium models have now evolved as an effective analytical framework,
which helps in deciphering the relations between trade policies and commodity price signals that
are received in a country and transmitted through supply channels. These computable general
equilibrium models trace the production, consumption and flow of goods and services between
two or more linked regional or national economies to determine the effects that changes in
policies, such as trade, or supply /demand shocks have on equilibrium prices and welfare. In the
case of analyzing policy shocks on GSFSs, spatial price models such as the IFPRI standard
computable general equilibrium model help dissect how import tariff, export ban, or subsidies in
one country or region affect other countries’ prices and variability. One drawback of many basic
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models is that it treats internationally traded commodities as perfectly identical goods and also
assume that border prices changes are perfectly transmitted to the domestic markets. Since staple
foods ought to conform to law of one price if markets are integrated, any variations identified
indicate that the markets are imperfect and price transmission can be slowed down or even
become asymmetrical. Some of the factors like the transaction costs, local trade policies,
standardized food industries, and exchange rates may in effect be segmentation points for
markets and facilitate trade arbitrage that actually divorces the border and consumer prices. To
have more realistic representations which have been incorporated into the spatial equilibrium
models are product differentiation, multi-market linkages and feedbacks, costs of changing prices
or prices of changing quantities, gravity trade theory and the conditions for interaction among
firms and the amount of quantity adjustment within a certain time period due to changes in
supply or due to policies. Model parameterization that incorporates these market conditions, and
robust welfare analysis that includes comprehensive sensitivity tests are required,
though. Another scholarly field that is equally crucial for describing and quantifying food price
determination and escalation from the world markets to the retail sector within a specific country
environment is the value chain analysis that offers key insights into the effects of drivers to
inform spatial price modeling at local scales. All the same, when Endogenized with adequate
data and used to answer right questions, spatial equilibrium models remain an indispensable tool
in ex-ante evaluation of trade policy reforms at the national and regional levels in realizing set
objectives for domestic food prices and the distribution of global welfare.
2.4. Exchange rates and their impact on food prices
Changes in exchange rates have a far-reaching impact on the food price in the global market.
When a country devalues its currency against other world currencies, it means that it will be able
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to purchase less of goods that it imports. This clearly means that it becomes more expensive for
such a country to purchase basic food items that are priced in U. S dollars or euros in the global
market. This is because when the exchange rate changes, the cost of importing the food stuff
increases and this usually leads to increase in the price of the foods sold in the domestic market.
An increase in import prices results in an increase in retail prices due to the passed-on cost to
both producers and retailers. Developing countries that are net food importers and are
experiencing depreciated currencies; exchange rate pass through results to widespread food
inflation for domestic prices. This increasing trend in the unaffordability of food has a negative
impact on the destitute population by narrowing down their capacity to afford food products that
meet their dietary needs. In contrast, a country with an appreciating currency can buy imported
cereals and meats at comparatively cheaper prices, putting pressure on food prices in the country.
These exchange rate impacts are relevant for tradable food items and basic goods that are widely
Exchange rate impacts are most critical for staple foods that are imported regularly into different
countries and include wheat, rice, corn and milk powders. The process of transmitting prices
from the global markets to domestic markets hence involves floating exchange rates and changes
in currency in relation to the major pricing currency such as the dollar and euro. Policy measures
for managing exchange risks include the use of hedging instruments or foreign currency reserves
or restricting money flows through capital controls. But for stability cooperation on monetary
matters on an even broader international scale is required. It is all well known how the world has
witnessed the last decade that a 10-20% fluctuation in currency parity can bring in substantial
change in the terms of trade for the developing countries or shift the cereal import bills by
billions of dollars in a year. Thus, the exchange rate is another crucial tool to address domestic
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food prices and make food more affordable through trade, fiscal and production instruments
alongside policy.
2.5. Theory of comparative advantage in agriculture
According to the theory of comparative advantage it holds that for a country to produce and
export effectively, it should concentrate on goods and services that it can produce more
efficiently than other nations, while it should import goods and services that other nations
produce more efficiently. This theory can also be taken in the case of agriculture where several
countries export those products in which they have a competitive edge in the international
market. For instance, nations with vast areas of arable land, a good climate, and favorable
facilities for irrigation for growing cereals and oilseeds may produce and export bulk quantities
of wheat, corn, soybeans, and so on. Likewise, nations with suitable Agro-climatic conditions for
horticulture and floriculture may specialize in producing fruits, vegetables, and flowers. On the
other hand, the countries with restricted and water-deficit arable land may import bulk cereals
oilseeds and livestock products while specializing in the production of high-quality cash crops,
fruits vegetables, spices, coffee, tea etc.
which can get good price in the international markets as compared to the quantity. In this way,
the comparative advantages of various nations determine the pattern of international flow of
agricultural commodities to a considerable extent. Though, during the last few decades, the
liberalization of trade and globalization of the agri-food supply chains has pushed even the
countries that are short of land and water resources to import land water and other resource to
manufacture bulk products for domestic market as well as for export. This has therefore eroded
natural comparative advantage and amplified the influence of technology, management practices,
subsidies and trade policies on agriculture trade flow. Therefore, trade according to the theory of
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comparative advantage does not adequately account for contemporary patterns of trade in world
agriculture.
3. CASE STUDIES OF TRADE POLICIES AND FOOD PRICES
Particularly relevant are case examples that describe the effects of specific trade policies on food
prices in particular countries. For example, India in the early 1990s adopted measures that
liberalized it economy through elimination of quantitive restrictions on the imports of various
agriculture commodities. There were high expectations that more imports would result in a larger
supply chain that would ultimately bring down high onion prices. But it caused cheap imports of
onions from China which impacted the markets drastically by lowering the prices. They have
impacted India’s own Onion farmers negatively by reducing production incentives. Some years
later when the domestic onion crop was hit by pre-nior rains the liberalization of the import
policy helped cushion the price rise but facilitated increased volatility due to imported and export
liberalization. Bureaucrats saw the reasons for a standard approach that would help fix prices
without unreasonably affecting the production, consumption, or trade interests of the
stakeholders. Another example of trade policies is the case of trade policies for rice in Japan
which has influenced its domestic rice market for many years. Japan levies high tariffs on rice
imports; this makes the rice prices high for the Japanese rice farmers in an effort to ensure that
the country meets its food adequacy policy. However, this has made the prices of rice 3-4 times
higher than the international price, largely in Japan. Here the trade protection helps to achieve
food security objectives but makes the consumer costs extremely high. In contrast, trade policies
for coffee in the international market are almost free or lightly regulated and highly sensitive to
the changes in the global market prices. Trade policies therefore present themselves in diverse
ways that show different effects on prices through various processes in individual countries and
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crops. Such case studies thus offer qualitative richness to unpack these multifaceted relations
between the choice of trade policies and food price levels.
3.1. The 2007-2008 global food price crisis
The periods of 2007 and 2008 can be regarded as the time when the most significant food price
hikes were observed worldwide, and the FAO Food Price Index rapidly soared to previously
unseen levels within several months. It is evident that many different factors contributed towards
starting this crisis, but national trade policies and policies responses have contributed greatly to
the increase in the price and is sustained throughout the period. Measures like export restrictions
of important food staples by major exportation countries that were implemented due to
seemingly rising prices exacerbated and extended the crisis due to protectionist trade policies.
When basic food prices, such as rice and wheat increased in the global market towards the first
quarter of 2008 due to some factors including high energy costs, drought in Australia and
increasing demand from Asia. They introduced trade embargoes and quotas that would
effectively close off export markets to make local markets the reserve of the domestic
populations and affordable to the populations. This only pulled out crucial supply from
international markets when there was shortage, and exaggerated global shortages, and sustained
the high and rising trajectory of food prices internationally. India and Vietnam reduced its rice
export supply to almost negligible level while Argentina imposed export taxes on soybeans, these
staple food items went out of import list. More than 15 of such policy changes in the basic staple
food suppliers inflicted a severe blow to the importing nation that were suddenly faced with
steep price inflation in essential items. While inducing stable inflation at home, exporters caused
volatile inflation volatility in foreign countries, which worsened hunger and financial suffering
for poor net food importing nations and societies around the world and triggered significant
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social upheaval. National policy reactions thus significantly aggravated and duration of the food
price crisis of 2007-2008, predicting how integrated country trade policy changes can shake
entire global markets when not individually coordinated during global supply issues. Perhaps
more regional trade coordination or multilateral policy management could have lessened the
expected global damage.
3.2. Impact of China's changing agricultural trade policies
China has made changes in its trade policies and the impact of those changes on the world
agricultural markets and food prices cannot go unnoticed. China has been, and still is, seen as the
largest producer and consumer of a number of agricultural products; hence shifts in its trade
policies can have a number of knock-on effects globally. Until the dawn of the new millennium,
China had high tariffs and quantitative restrictions to most agricultural imports to protect local
industry and government-led efforts at achieving food adequacy. Though, due to revolutionizing
economy of China now it has opened up trading rules for cheap prices for buyers and more
connection with international market. The latest change that occurred in 2001 when China joined
WTO signified a change in that it had to lower trade barriers on agricultural products. In the
following ten years, quantitative restrictions on crop imports were significantly reduced, and
import tariffs were slashed drastically. These liberalizations of China’s agricultural trade led to
relatively significantly higher volumes of imports from large grain exporting countries as well as
making the Chinese exports more competitive. China a few years ago was exporting many farm
products but today it is one of the biggest importing countries for farm produce. These dynamic
trade policies facilitated easier access to global agricultural trade flows with ripple effects on
foreign prices as well as stability of agricultural commodities. In the recent past through the Belt
and Road initiative and bilateral negotiations, China has persisted in the quest to open up its
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agricultural trade access with overseas markets for Chinese enterprises to boost agricultural food
security given unpredictable supply sources. In addition to the above-mentioned channels of the
China effect, through preferential tariffs as well as a higher investment in the purchase of
farmlands and agri-businesses overseas, China has a more directly effect on the global food
supply and food prices. Analysis reports that change or shifts in Chinese agricultural trade
policies are capable of distorting existing agricultural trade patterns and affecting producers’
choices and consumers’ costs for agricultural products crossing international borders; these are
examples of how trade agendas of large economies indirectly influence other related interests
such as the availability and price of food in a global society.
3.3. EU's Common Agricultural Policy reforms and global markets
CAP has been changed several times since the early 1960s it was launched with the objective of
orienting EU agriculture to the market and at the same time supporting the income of farmers.
Another reform was in 2003 which saw the implementation of the single farm payment system
that based subsidization on environmental, food safety and animal welfare standards and not on
frequency. This led to reduction in incentives for excessive production as well as made EU
agriculture more innovative and sustainable.
More adjustments in 2013 shifted the orientation of the policy even more to competitiveness,
sustainability and climate by establishing a direct payment that was a result of environmental
farming practices. New instruments were also introduced with the purpose of risk and crises
management. The change in production resulting from the 2013 reforms was expected to bring
down EU agricultural output to 6 percent below the baseline by 2022. It could help to provide
some stability to internal EU prices and to make production more demand-oriented. However,
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such a situation can also have a negative effect on the export markets in the short run since the
EU has been exporting agri-food products and the global availability of food reduces.
A number of other factors such as changes in dietary habits, innovation, climatic shocks, export
policies of other leading agricultural producers, speculation in commodities futures markets etc.,
also influence price determination and affordability of food by world population when the CAP
reforms are considered. But, when studied empirically by other institutions, they reveal that the
CAP reforms that have reduced the EU share of global agricultural trade have helped in
promoting supply side response to price signals. This is useful in the context of EU production
decisions being better aligned to world demand and the general effect of which leads to lower
and less volatile world prices that improves consumer affordability particularly in food importing
developing nations. These changes have also made it easier for movement of agricultural land for
bioenergy crops that affect the markets globally. In conclusion, while CAP reforms complement
the ‘Sustainable Intensification’ approach, and hence, contribute to the global food security and
affordability issues their positive externalities are felt in the long run as they link subsidies to
sustainable intensification and de-link them from overproduction.
3.4. Effects of US farm bills on international food prices
Various farm bills that periodically passed in the United States as the legislation of subsidies,
crop insurance, conservation, trade, nutrition and other agricultural policies has influenced the
increase in food prices throughout the years. Some subsidies create incentive for the
overproduction of specific crops which put downward pressure on world market prices,
economists have observed. For instance, thanks to subsidy incentives, growers from the US
supply global markets with excessive amounts of corn, resulting in low international corn prices.
This was evident when after polices in 1996 and 2002 farm bills overproduction of grains in the
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US continued to persist. The endowed crops continued to ensure price remained low even when
other leading grain exporting nations produced lower yields. Subsequently, it has been claimed
that the increased biofuel production in the United States as a result of biofuel subsidies and
requirements established by the 2005 and 2008 farm bills also contributed to the cost of food
around the world. Reducing the supplies of corn and soybeans for foods and feeding the animals
and instead using them to create products like ethanol helped increase agricultural commodity
prices due to less availability of these crops for export from the US which is a major supplier.
Corn and soybean prices tripled themselves from the early 2000’s up to their heights in 2011-
2012 while wheat prices two folded themselves in the said period. Subsequently, certain
methodologies including cointegration tests point out that as much as 60% of the hike in corn
prices in 2008 may have been caused by the US biofuel policies that boost demand. Increased
costs of these crops can exert pressure on food chain networks all over the world. With the help
of uplifted energy costs, these policies resulted in uplifted domestic food prices across the globe
which raised questions on food accessibility. Examining the impact of consecutive US farm bills
over the past few decades demonstrate that trade and subsidy policies of main exporting nations
have ripple effects that are often unforeseen. However, any freedom given to the domestic
farmers in the US such freedom to overproduce some crops or to use them in other ways apart
from feeding people can disrupt the global supply-demand equilibrium. The implications of
monopolistic power are that the final prices are raised and the effects are then felt by the food
importing developing countries with affordability challenges.
3.5. Trade wars and their consequences for food affordability
Based on the data measured in the past decade, trade wars, which involved the implementation of
tariffs that one country imposes on another based on the imposition made by the latter, have had
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concrete effects in food prices and accessibility in the global market. With the United States,
China, Canada, Mexico, India, and Brazil as major global producers, new import tariffs on
soybeans, corn, wheat, rice, beef, pork, as well as dairy products creating tensions through
imposing retaliatory tariffs on important agri-foods. This has led to the establishment of
fluctuating prices within and across many food production and consumption chains across the
globe. For instance, when in 2018, the United States started applying across-the-board tariffs on
Chinese merchandise, China reciprocated by placing reciprocal tariffs on American crops that
wrongfully narrowly cut the margins of profits of farmers and made basic crop exports from the
U. S. to China inexpedient. Hence, the standard of food price increase directly affected the
poorer Chinese consumer groups to absorb higher prices with foods such as pork and other
products being core targets of the trade war general food price index in China went up. However,
trade disputes are not simply issues related to food or agriculture but, as such cases as the US-
China trade war, import taxes lead to a decrease in food accessibility downstream for the average
consumers in the countries that suffer from such mechanisms. Short term trade wars can force
realignments where, for example, Brazil or Australia decide to divert crop exports away from the
trading partner, aggravating the constriction of the supply and keeping food prices elevated for
longer than otherwise. If not managed diplomatically and with mutual understanding of the
interconnections between the economies of the 21st century’s major powers trade wars can be
expected to continue to disrupt global food export and production supply chains and fuel
volatility – leading to food being made less accessible at the retail level as costs are passed
upwards through the supply chain.
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4. FOOD PRICE VOLATILITY AND POLICY RESPONSES
In recent years, the issue of food price stability has become an alarm, due to frequent and wide
swings in domestic and global markets for important food items such as rice, wheat and
corn. This raises serious questions over food availability and accessibility for consumption
especially for the NFIDC’s and most vulnerable groups. This is directly related to trade policies,
as export bans or restrictions by the main producers cause scarcity. Others are factors such as
high energy cost in the production of food commodities, extreme and frequent natural disasters
caused by climate change, speculation and incurred correlation between the prices of foods and
those of financial markets, and diversion of food crops for biofuel production. Tighter stocks are
also involved as is speculation to certain degrees. The effects can be very drastic, the 2007-2008
crisis contributed to increasing the number of people living in poverty to more than 100 million.
Policy responses have varied and encompassed modifying trade policies, use of food reserves,
social protection, and enhancing the ability of smallholders to cope with the situation. Recent
measures to lift export restrictions, on the one hand, contributes making global markets less
volatile during crises, on the other hand, reporting of production and stocks provide assurance of
availability. distribution of public food grain stocks to targeted groups also serves as a social
safety net In addition to other programs which offer and income support, subsidized food and
condition cash transfer. Funds for research, infrastructure and extension all support productivity
improvement and value chain efficiency. For the purpose of this paper, Regional Trade
Agreements are understood as the processes that enhance actual and/or potential market access to
products in different countries. There should be policy coherence on the agricultural ministry,
trade, and finance ministries in the future. Changes in trade policies, creating reserves, enhancing
institutions in terms of market information, and long-term investments in productivity can
sustainably develop the antidotes of price volatility that can also guarantee access and
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affordability for vulnerable groups. The assessment of nations’ preparedness, reaction and
flexibility, together with the use of proper policies continues to be of utmost importance.
4.1. Causes of food price volatility in global markets
It is now possible to identify several factors that explain the observed fluctuations in the
international food prices that happened over the past decade. A key element is the high incidence
of severe weather and natural disasters in the world that may negatively impact or slash the
production of crops in significant food exporting countries. For instance, one can refer to the heat
waves and the droughts in some of the key grain producing areas like the United States’
Midwestern region, Russia and Australia in the late 2000s and early 2010s to witness a drastic
reduction in global wheat stocks. Under these circumstances, national food stocks are low, which
means that any interruptions of supplies can cause a sharp increase in prices on the international
markets. The second important factor is the high inflation rate and especially in the prices of
energy resources that affect the major factors of production that include fuel, fertilizers and
transports. This directly leads to increase in food production prices and the prices of foods in the
market. Further, output of bio fuel has become another trend found in many developed countries
that have also established a direct correlation with global oil prices for food prices. Another way
through which food price volatility is entrained by the financial system is through speculation in
agricultural futures markets in that it distorts price signals. The third factor is increasing food
consumption from the new economic powers such as China and India in accordance with the
growth of per capita income. Demand outstrips supply in this case, further making global
markets vulnerable to shocks in comparable fashion. Policies that other exporting countries adopt
that limit exports also increase the level of price variation, a factor that worsens the effects of
changes in global output. Last of all, the rise of regional agricultural markets linked with global
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markets implies that local or regional supply shocks can now affect global markets and vice
versa by transmitting price risks between them. This means that even if there is a long-term
global food supply and demand, the market is liable to go through drastic fluctuations in the next
few years due to multiple sources of market insecurity. The situation calls for policies that deal
with these causes and build the required shock coping capacity of the global food system in
production, distribution and marketing.
4.2. Export restrictions during price spikes
If there are adverse supply shocks such as poor harvests or high input prices globally, there has
been observed precedents of certain food exporting nations imposing quantitative restrictions on
exports in order to shield their own consumers from high prices or to ensure adequate availability
of food in their domestic markets. For instance, when there was a food crisis during 2007-2008
in general that led to doubling or tripling of wheat and rice prices within a short span of time
many countries including Argentina, China, India, Ukraine, and Vietnam amongst others resorted
to imposing export taxes or other forms of quantitative restrictions such as export quotas or even
going to the extreme of banning export of grains. Which in turn led to even higher prices being
demanded by foreign markets. Subsequently, food affordability and accessibility are important
indicators that revealed that import-dependent regions such as North Africa and the Middle East
that depend on Black sea export of wheat are affected most negatively. These SCM studies
indicate that these export restrictions raised world price of rice by about 30 percent above what it
would have been if not for the export restrictions and for wheat by 20 percent above the
reference level. Consequently, there are requests to collaborate in avoiding the export restrictions
that increase price fluctuations at the international level. A few have reasoned that governments
should be permitted to place short-term export bans, but these need to be declared publicly and
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need to be of limited duration, not extended beyond the existing crisis period. Other people
consider that export restrictions should be banned entirely, but only for some special
humanitarian reasons. Also, there are talks on the payment of certain countries that do not act to
increase export bans when the price rises to an abrupt high. For instance, World Bank has
suggested providing financial risk management tools that can cover parts of the fiscal burdens
that result from export countries choosing to keep markets open. Because of political pressures,
export restrictions are seen as a tempting short-term measure by some policymakers to reduce
domestic prices impacts, however, this policy tends to fail as it results in higher and more
volatile international prices that inflate food prices worldwide, particularly harming the PNG,
which is a net-food importing country.
4.3. Buffer stocks and price stabilization policies
In a bid to mitigate food price volatility and ensure adequate and stable food supply,
governments can use tools such as buffer stocks and policies on price stabilization. Buffer stocks
are physical inventory or stocks of basic staple foods such as grains that are owned and
controlled by the government or some relevant public bodies. It also provides information on
when the government can make its own purchases, during surplus production and low prices, to
stock up on grains in its stores. These stocks are then released back into the market when there is
undersupply and demand triggers the beginning of a price increase. The effect of freeing of
stocks in the market means that prices will be pulled down, hence decreasing volatility. This
means the government is able to regulate food inflation in the country. Buffer stock policies are
commonly employed by the developed and developing countries of the world including the
United States of America, China, India, Brazil and other countries and they are generally used on
basic food items such as wheat, rice, corn and soy beans. Buffer stocks work well when there is
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accurate production forecast, the buffer facilities, proper timing for release or build-up and
appropriate procurement prices for farmer incentive. Other counterparts of trade policies such as
variable import tariffs also help to support the role of buffer stock policies in stabilizing the
prices in the domestic markets. For instance, when local prices are high, protectionism measures
such as high tariffs can be eased to enable more imports and supply into the domestic market.
Other types of price stabilization instruments include: MSP and STE, which also help control
food price volatility. MSPs fixed a minimum price to prevent rapid falls that hurt farmers and
STEs are government agencies that have the right of monopoly in the imports and exports of the
main staples. Thus, action on the part of STEs, especially the countries such as India, Bangladesh
and Indonesia in the global food market can help insulate domestic price levels and volatility of
basic food grains. However, price stabilization policies have to follow the best interest of the
consumers as well as the sellers. When MSPs are set too high, it becomes a lure for the producers
to produce in excess and also, the procuring department of the government incurs a higher cost,
while buying into the buffer stocks. Likewise, fixing STEs to keep artificial low global prices for
exports can also hurt farmers’ revenue. Hence, the specifics of buffer schemes and price policies,
must be in a fine balance and in unison with several objectives at one and the same time,
affordability of prices for the consumer, viability of incomes for the producer, fiscal
responsibility and the smooth running of markets. When orchestrated well, buffer stocks and
price stabilization instruments can be useful instruments to complement trade tools in managing
extreme food price risks and ensuring the right price levels for food are affordable particularly by
the vulnerable groups in society.
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4.4. Financial speculation in commodity markets
Commodity speculation in financial markets particularly in agricultural commodities have been
cited as factors that significantly influenced fluctuations in food prices over the last decade.
Critics posit that as deregulation opened up these markets to more actors with no regard for the
physical Good, it created a herding behavior compounded by over-optimism or pessimism, thus
dis-connecting the price from basic supply and demand factors. For instance, there are some
studies which reveal that the relations between the commodity futures prices and the prices of
crude oil and equities have become stronger, This suggests that commodities are traded
increasingly based on the analysis of portfolio allocation strategies and not necessarily supply
and demand factors in the physical market. Nevertheless, the available evidence in sum and on
balance to present is inconclusive and variable about if and to what extent financial speculation
fuels commodity price fluctuation. It is challenging to establish causality due to issues arising
when distinguishing between the shifts in intrinsic value and changes in funds flow. Furthermore,
improved volatility can be both disadvantageous to consumers and producers however it is also
beneficial in instances of financial speculation for the sake of increased market liquidity.
Due to fear of market manipulation, the authorities have sought to establish more rules and
openness in the commodity derivatives markets to discourage speculation and other market
disruptive activities yet allow these markets to operate efficiently. For instance, the US has
adopted position limits in an effort to regulate the multitude of market power by setting certain
limits on the net long or short positions that speculators can take. However, the managerial and
highly efficient financial markets are not an easy nut to crack, and the governing authorities must
manage several objectives, and thus poorly designed policies may have potential adverse effects
on the issues of liquidity and price determination. They also highlighted the major coordination
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problems for regulations of these markets due to their international character and the problems in
tracking the trades across borders. Although policies that are designed to curb commodity market
speculation are much given a lot of consideration, macroeconomic fundamentals and trade
policies that affect the base market fundamentals of supply and demand of agricultural produce
are likely to have a much larger effect on long-term movements in food price. Understanding the
nature of high and fluctuating food prices and the policy actions needed to respond to this
phenomenon is best done using a multifaceted policy instrument framework focusing on both,
financial and physical instruments in the agrifood chain.
4.5. International coordination in managing food price crises
New developments such as the global food price crisis of the late 2000s and heightened price
volatility in the past decade have however led to renewed pressure on policy makers to increase
international policy cooperation in the area. If key exporting countries resorted to export
limitations or importing countries began hoarding supplies during a price hike, then these trends
can significantly amplify global price fluctuations. Therefore, as it is claimed by many authors,
improved coordination and information exchange between countries concerning national policy
measures is essential. Suggestions in this area include propose a UN based monitoring or
surveillance for global data on national food stocks and trade barriers to enhance the flow of
information to key importing and exporting countries in periods of crises. Some analysts have
also argued for codifying what Schuknecht calls a ‘code of conduct’ before resorted to export
restrictions during price spikes – such things may include caps on how restrictive measures can
be or how restrictions can be phased in gradually. Such guidelines might be agreed and
implemented through international bodies such as G20 or WTO as a way of putting confidence in
world markets and act as a check on policy bipolar reactions every time that prices go up or
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down. It could also be made at the regional level, where the main food exporting and importing
countries discuss and sign bilateral or plurilateral deals to avoid using trade measures during
crises. For example, deals on such key value collaborative grain reserve arrangements or
humanitarian food aid pledges could be made between major grain exporting areas such as North
or South America and major importing areas in Africa or the Middle East. it is important to
promote the improvement of international cooperation and exchange of experiences in the
establishment of national food policies, the development of agricultural information networks
and the response to crises. To contact whether through a formal trade rules or informal discussion
and collaboration, closing the international policy gap with regard to sudden hikes in food prices
could minimize the risk of random fluctuation and safeguard some of the World’s most
vulnerable citizens. One of the global investments that can be recommended for enhancing
stability and yielding considerable humanitarian returns in the long run is investing in improved
global governance and coordination mechanisms in this area.
5. TRADE POLICIES, FOOD AFFORDABILITY AND FOOD SECURITY
Policies that govern trade and commerce of agricultural products have a very important impact
on the global food prices and accessibility. The policies, including tariffs, quotas and subsidies to
support domestic farmers for their produce often leads to making food products costly to
consumers by restricting more affordable imports. This shrinks the available market for healthy
and cheap foods for lower income groups, thus a blow to the food security. For instance, when a
large exporter like India, sets export controls during periods when there is a shortfall in domestic
production to ensure more grain is available for its people, there is less grain available for
exports thus high prices results. This makes it hard for millions in developing countries to afford
staple grains which are major sources of foods in their diets. Trade polices also affect food
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security through affecting international food commodity markets as well as the overall food
production systems. Subsidies to exports result in over production of crops like corn and soy
beans in some countries, and contribute to low prices in the global market in the long run, this
has the potential to encourage mono-cropping export-oriented agriculture instead of a food
balanced production for the domestic market in the developing countries. They are then able to
increase sharply their domestic prices during what we may call market shock events such as
droughts or disease outbreaks that affect harvests and reduce availability of food imports by
developing countries. Some protectionist trade policies seek to protect domestic farmers or
achieve national food security, and although these goals are well-intentioned, they end up
destabilizing global markets and slowing adaptation. This way, liberalization of trade policies
that enable nations to specialize in the production and export of foods that they can produce at a
better quality and in a larger quantity will reduce food insecurity. Thus, trade rules must take into
account both the countries’ interests and global food security objectives towards providing access
to sufficient quantity and quality of food to the populace.
5.1. Measuring food affordability across countries
The comparison and estimation of food prices among different countries may pose some
technical difficulties, resulting from the differences in the income levels, food prices and the
purchasing power. Another measure that is often used is the food cost that is associated with a
standard food basket that would provide a particular number of calories. These food items
generally include the basic food items consumed in a particular country such as rice, wheat, corn
as well as basic proteins. This food basket’s cost is then compared to income measures to
determine the extent to which a certain income can afford this food. Higher percentages depict
higher food insecurity and less affordable foods while conversely; the lower percentages are in
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line with food security and more food access. For instance, the quantity of basic foods that cost
and average daily income is, the affordability percentage would be 50%.
Trade policies therefore affect the affordability foods by affecting food prices and or incomes.
Trade barriers such as tariffs that limit importation of food products have negative impacts on the
local prices of food and hence affects the affordability ratio in the country. On the other hand, the
free exportations that help to break barriers to imports can also bring about cheap and affordable
food prices as the danger holds to local producers. Trade opening improves economic growth
that enhances incomes though the impact on the affordability ratio could be ambiguous.
This shows differences in food insecurity, where the affordability ratio between different
countries shows the disparities. Affordability ratios above 75 per cent therefore classify as very
high and imply that low-income groups face severe food hardship. Rural farm households in
developing countries for instance fall under this type of consumer. Similar to the case of
affordability caloric rankings, differences in the baskets also arise due to differences in
nutritional values where the countries classified as the developed ones include costly foods as
compared to the basic staple ones. It is therefore important to make affordability metrics
comparable by applying appropriate indices.
The national averages hide differences in the internal affordability by regions and social statuses
in different countries. Still, poorer families experience higher troubles of food security than
general data might depict. Wording the survey in more detailed manner which captures
information on spending on food per household and income earned per household makes it easier
to compute the affordability ratios within the targeted groups. Therefore, tracking trends in
affordability over the years, at the national level and in regions and provinces within countries,
allows for a better understanding of the dynamics of food security in the context of economic
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development and changes in trade policies. These include comparing the relative proportions of
food expenditures across different countries as well as looking at time series data on the changes
in these shares to establish the effects of trade policies on the price of food.
5.2. Impact of trade liberalization on food access
Liberalization of trade brings about mixed effects on the global food insecurity and availability
of cheap food products. On the production side, alleviating trade barriers such as import taxes on
production inputs, particularly inputs used in the farming of export crops such as agricultural
chemicals, fertilizers and equipment can help enhance efficiency among farmers targeting export
markets. Analyzing the NAFT effects, it is possible to identify that the Mexican farms exporting
fruits and vegetables received a positive effect due to the decrease in the prices on the essential
agriculturally produced inputs. Increased yields and reduced costs put these large capitalized
farms into a position to lower export prices and increase market share, while small Mexican
‘peasant’ farms found themselves pushed out of the market by cheaper US subsidized maize and
other basics.
Increased farm productivity, however, may benefit the well-off growers and ignore peasants,
smallholders or subsistence farmers who dominate farming practices in the developing world.
Moreover, high food yields from inputs-intensive farming may not necessarily result in cheap
food for the poor. For instance, the initial stage of the “Green Revolution” in the Asian countries
resulted in increased income disparity because innovation favored wealth farmers with resources
to purchase pesticides, fertilizers, and better seeds than the poor farmers who else could not
afford better yields. Trade liberalization in some circumstances has increased scale and export-
oriented production by large-scale farmers who hold significant amount of land and capital – this
has not helped to reduce poverty and hunger as was expected by freeing up the market.
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By demand side policies local producers of essential commodities have seen their prices fall due
to reduction of tariffs on these products without much impact on their production capacities.
Domestic agriculture sectors can have a tough time competing with cheaper staple crops
imported from abroad, but low food prices can quickly turn around when global commodity
prices do the same. Countries that rely on trade therefore have their ability to feed their
populations at cheap costs compromised during global crises. Due to the liberalization of trade,
dependence on food import has gone higher than the local production capacity in many low-
income food insecure nations; these nations lack policy support and protection for the local
producers of food grains to help they avoid price volatility and supply interruptions. While trade
liberalization has led to a decrease in food prices in the short run it can actually exacerbate
hunger in the long run when domestic farms have been done away with and households become
without food producers. Yet, risks persist as some countries and segments of the population gain,
such as net food importers and the unemployed, become net losers.
5.3. Balancing producer and consumer interests in trade policy
Policies related to trade that allow protection of domestic producers of agricultural food
including measures such as restrictive import policies, export incentives and other policies will
assist in sustaining reasonably healthy incomes and standards of living for farmers and those in
rural areas. But the same policies are usually a recipe for raising the price of food on consumers
and a decrease in its accessibility. Elected officials, as a result, are left with a dilemma of how to
support home grown agriculture produce as a way of creating revenue for the farmers while at
the same time making sure that low-income earners are able to afford food. This means that
while supporting producers beyond their ability to sustain can harm the consumers,
overemphasizing a low price for consumables can affect the means, through which farmers can
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sustain their practices in the long run. It means that, an integrated policy approach should be
adopted where the focus of policy and programs should be to address the issues of both the
groups.
It is possible for agricultural support policies to be designed in several ways so that they may
have minimal effects on the affordability of the commodities. IPS provision through government
purchases, storage programs and borders measures help farmers to achieve fixed minimum prices
for their produce thus stabilizing and improving their incomes though these come at the expense
of consumer costs. Switching to certain kinds of market price support with direct income support
payments to producers could still guarantee viable returns for farmers without contributing much
to the increase of food prices. Other related strategies that could equally reduce affordability
impacts include allowing low-income earners to purchase subsidized basic food baskets. There is
the possibility of changing trade policies and WTO rules that may enable the developing nations
to use policy instruments to support the domestic producers and the food security policy goals if
only those instruments with large impacts on consumer prices are ruled out.
Capital and efforts to increase productivity and efficient markets and logistics can in the long-run
be positive for both groups by reducing the costs faced by consumers whilst increasing
profitability for rational producers. Development of economies along with an increase in
incomes also reduces the need for continuing trade distorting farm subsidies as the share of
agricultural products reduces. In the long run, sound producer support policies, and calls for the
improvement of productivity through public capital, poverty reduction strategies, and reasonable
trade rules and agreements for domestic food security as well as for the global market can be
helpful to both producers and consumers.
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5.4. Trade policies and nutritional outcomes
The policies that either ban or impose high tariff on food imports tend to lead to high food prices
in the domestic markets hence making food out of reach for the common populace particularly
those in the lower income brackets. This can have a detrimental effect on the nutritional value of
food when people replace the expensive foods with cheaper, more filling but less healthy
varieties or alternatively they will consume less food in total as a result of the increased prices.
For instance, the Malawi Government affected export bans on maize, a staple food, which led to
a 60% increase in prices. Malawian poor households lowered their per capita consumption of
maize by 25% and the population’s total calorie intake lowered by 7%. Malnutrition rates,
particularly stunting, increased due to the high costs resulting from the unavailability of quality
and affordable food. On the other hand, such polices as those that allow the minimization of
import tariffs and other trade liberalization measures make food cheaper. Indonesian imports
such as wheat, beef, and other dairy products experienced a cut on barriers to entry and this led
to a 5-13% reduction in the local price hence a boost to the purchasing power of the people. This
was partly responsible for the reduction in anemia and vitamin A deficiency due to increased
consumption of animal-source food in families. Another methodology through which domestic
production subsidies may affect nutritional outcomes is through food prices. India subsidies were
given for rice and wheat which helped in production, availability and per capita consumption
was also high but did not encourage the production of millets and pulses which are more
nutritious. This exacerbated protein deficiencies. Although cheap staple foods have the effect of
eliminating hunger in one fiscal year; over reliance distorts future food security and nutrients.
Policies should be more balance making the barriers to imports low in order to maintain the price
of staple foods low while at the same time applying premium incentives to domestic production
of fruits vegetables and legumes that are expensive but healthy foods. Thus, the major
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comprehensive reforms connecting trade and domestic policies can be seen as the most
promising to support erosional affordable and nutritious diets necessary for food security status.
5.5. Policy recommendations for enhancing food affordability through trade
By adopting open and transparent trade policies people in the required countries can be able to
afford the food products easily. A priority for policy attention remains the trade liberalization –
elimination of trade barriers and trade distortion. Excerpt: It is also evident that abolishing
agricultural export subsidies and lowering barriers to import food staples can assist in stabilizing
global prices. The authors expect the developed countries should refrain from readjusting new
export bans during food crises around the globe as such practices augment volatility
more. Attempts to reduce trade costs by easing regulations on cross-border transactions might be
greatly beneficial to international trade. Investment in infrastructure, including communications
and transport networks between over supplied and under supplied areas is also crucial.
Market transfers in large exporting countries that lead to overproduction are not self-contained
since they affect other countries. Better approaches to regulating and taxing resources could also
be implemented to assist in redressing the world’s imbalance. Food aid programs should not
deter local production hence the strategies should entail buying food from the specific region as
often as feasible. There is still room, however, for policy interventions on behalf of developing
countries to support their agricultural sectors; the productivity in this area remains low.
Government spending on road infrastructure, irrigation facilities, crop development and farmer
training is thus justified.
It has also been argued that there is a need to uphold and enhance multilateral trade rules for food
security. The WTO should focus on the completion of Doha Round since it is the only source of
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setting new distortions in trade. National and regional agreements should not contradict multi-
lateral principles. Other aspects that require strengthening include those related to the
implementation and enforcement of trade dispute mechanisms as well as monitoring of
compliance with undertakings entered into. However, this changed in the 2015 Nairobi WTO
Ministerial Conference where members committed to ban export subsidies and cap the domestic
supports. It is possible that when implemented in full, agricultural markets could become even
more liberal.
There should be integrated policy strategy concerning the linked factors of trade, climate change,
agriculture and population. No single solution exists. It is going to be necessary to stimulate open
markets for growth while also maintaining safety nets that are selective in their
coverage. Importing countries are indeed in need of special help, especially those with
vulnerable food security. Leveraging on insurance tools that make payment when import costs
increase may help. Regional reserve systems in warehouses can also reduce risk exposure when
these systems are scaled to match the company’s size, they may smooth out fluctuations. Thus,
promoting the improvement of the international cooperation processes and trading system
effectiveness can contribute to making food cheaper for consumption across the world.
