International Food Price Spikes and Temporary Trade Policy Responses

Abstract

Many governments insulate their domestic food markets from gyrations in international prices. The collective impact of such interventions by a large number of countries is to increase the volatility of international prices, and thereby to increase domestic price volatility in more open countries. Yet if a similar proportion of the world’s food-exporting countries insulate to the same degree as a group of food-importing countries, each group will fully offset the other’s attempt to prevent their domestic price from moving as much as the international price. Simple model results suggest the world probably would see less people fall into poverty when international food prices spike if all countries agreed to abstain from altering trade restrictions in the hope of insulating their domestic markets from such spikes.