Trade policy and food price volatility in LIFDCs · •Price variations – cereal prices more than...

Trade policy and food price volatility in LIFDCs

David Hallam

Food and Agriculture Organization

Conference on Food Price Volatility, Food Security and Trade Policy, World

Bank 18-19 September 2014

Overview

• LDCs and NFIDCs 2011 proposal for WTO work programme

• Trade policy changes, especially import tariffs, and some of their effects

• Focus on LIFDCs and cereals

• Based on different pieces of FAO work

• Draw attention to some FAO information resources – GIEWS price tool and FAPDA

FAO Food and Cereal Price Indices (2002-4=100)

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Food

Cereals

Features of LIFDCs

• Diversity of 55 LIFDCs within classification including in policy responses

• Low self-sufficiency (around 70%) – reflects low productivity etc

• Declining importance of food aid shipments • Increased dependence on international markets

and vulnerable to international shocks, including policy shocks

• Trade balances emphasize cereals followed by oils and sugar where price hikes greatest

Low income food deficit countries food trade

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120000000

Import Value (1000 $)

Export Value (1000 $)

Low income food deficit countries net cereal trade

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Net trade ($000) Net trade (tonnes)

LIFDC cereal import bill ($bn)

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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$b

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LIFDC cereal import bill FAO Cereal price index

GIEWS price and policy information

• The first version of the GIEWS Food Price Data and Analysis Tool released March 2009. Now on third version

• Monthly retail and wholesale prices for staple food commodities (cereals, pulses , meat, fish ...) in selected markets in each country

• 1130 monthly domestic price series in 82 countries

• 28 international cereal export price series

• 20 different food commodity categories

• Price tool for graphics, statistical analysis etc

Philippines Rice Prices (regular milled, Philippine Peso/Kg)

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Wholesale

Retail

Tanzania domestic rice price

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r-1

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Tanzania, Dar es Salaam, Rice, Wholesale, (Tanzanian Shilling/tonne)

Tariff reduced to zero January 2008

LIFDC trade policy responses

• Trade policies seen as quick and cheap way of augmenting supplies and slowing price increases

• Conscious of consumer (reduced import tariffs, export restrictions) versus producer (import restrictions) interests and trade policies shifted to favour each at different times

• 60% of countries reduced import tariffs in 2007/8

• Import subsidies beyond budgets

• Import restrictions – not common, seasonal, periodic

• Export restrictions – even in food importers

• Responses after 2007/8?

LIFDC applied tariffs and tariff revenue 2006

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Weighted average tariff, %

Rice

Philippines

Nigeria


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Maize

Tanzania


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Wheat

Nigeria

FAPDA policy data base

• Food and Agriculture Policy Decision Analysis (FAPDA) - collection and dissemination of information on policy decisions to policy makers but also as a public good.

• FAPDA analyses aim to promote coherent and effective food and agriculture policies.

• FAPDA web-based tool tracks national food and agriculture policy decisions in more than eighty countries;

• More than 6000 policy decisions since 2008, classified (consumer, producer, trade) and documented

• http:/www.fao.org/economic/fapda/tool/Main.html • Developed from GIEWS (ISFP) policy review which continues

as part of the price data base • Information sources

FAPDA policy report (part) – Tanzania

15/04/2010 Export prohibition A cereal export ban that was imposed in 2008, has been lifted in 2010.

Availability of Food

20/11/2009 Entry into force of a free (or preferential) trade agreement

The Protocol on the Establishment of the East African Community (EAC) Common Market entered into force on 1 July 2010, following ratification by all the five Partner States: Burundi, Kenya, Rwanda, Tanzania and

Uganda. The Protocol was signed by the Heads of States on 20 November 2009, coinciding with the 10th Anniversary celebrations of the revived Community.


01/11/2009 Export prohibition Cereal export ban that was imposed in 2008 is still in force.


01/08/2009 Other export promotion measures The Kilimo Kwanza (Agriculture First) under pillar No.9 : Infrastructure Development for Kilimo Kwanza included finalization of the construction of

Mwanza Airport runway extension to share chartered flights from KIA through Mwanza to Europe and facilitate the exports of horticulture and fishery products. The Kilimo Kwanza ( Agriculture First) is a national

resolve to accelerate agricultural transformation. It comprises a holistic set of policy instruments and strategic interventions, this initiative is a central pillar in achieving the country’s Vision 2025 launched by H.E. Jakaya

Mrisho Kikwete, President of the United Republic of Tanzania.


01/07/2009 Share of agricultural expenditure in the National Budget (increased or decreased)

For the Tanzanian FY 2009/10 the government allocated for agriculture Tsh 666.9 billion, showing an increase of 30 percent compared to Tsh

513.0 billion in 2008/09 including of EPA resources.


01/07/2009 Import Tariff Reduced As the wheat production in the region could not meet the demand, import tariff on wheat has been applied at a reduced 10 percent rate (instead of

35 percent)


01/05/2009 Export prohibition Export ban to its neighboring country, in particular Kenya, is and will remain in force in the foreseeable future.


01/07/2008 Share of agricultural expenditure in the National Budget (increased or decreased)

In the FY 2008/09 the Government allocated for agriculture Shillings 460.0 billion, compared to Shillings 379.0 billion in 2007/08. The larger amount of the budget allocated for agriculture will be spent on fertilizer

subsidies, the Special Grain Reserve (SGR), research particularly on improved seeds, and training.


01/01/2008 Export prohibition Faced with high food prices in 2008 and in an attempt to maintain food

security, the Tanzanian government established a ban on maize exports at the beginning of 2008.


01/01/2008 Tariff Faced with high food prices in 2008 and in an attempt to maintain food

security, the Tanzanian government removed the import duty on cereals, and had in place a zero import duty policy for maize until May 30, 2008.


Africa import tariff changes post 2007-8

Pre 2007-8 policies maintained

Tariff reduction maintained after 2007-8

Variable trends after 2007-8

Tariffs reintroduced after 2007-8 Import ban Import quota

Lesotho* Algeria (durum wheat) Mali (rice) Burkina Faso (rice) Nigeria Zambia

Togo** Sierra Leone (rice) Nigeria Senegal (rice, wheat) Algeria Kenya

Ethiopia* Liberia (rice) Morocco Mauritania (rice)*** Zambia

Egypt South Africa (wheat and wheat flour)

Ghana (rice, maize, wheat)

Mozambique** DRC (basic foods) Cameroon (wheat, wheat flour, rice)

Rwanda (wheat, maize) Kenya (wheat, maize)

Tanzania (wheat, cereals) Zimbabwe (maize)

Uganda (wheat) Chad,

Tunisia **** Malawi (wheat flour)

* no taiffs for basic foods

** tariffs maintained throughout period

***tariffs maintained at lower level

Implementing tariff reductions

• Policy reductions or suspensions

• Persistent reduction or unpredictable ad hoc changes eg Nigeria

• Often late and inadequate to cover price increases

• Loss of tariff revenue

• Widened margins?

• Effects on producers

• Impact on international prices?

How effective?

• Why tariff reductions? Quick, cheap, visible • Price variations – cereal prices more than doubled in 2007-

8: maize +110%; wheat +125%; rice +200% • Applied tariffs in 2006 in LIFDCs averaged 11% for cereals • Impact of tariff reductions limited and temporary • Distributional issues – who benefitted? Widening margins • Incentive effects on producers– tariffs low anyway but

further reduced incentives • National policy choices contrary to regional trade

agreements • Liberalization effects? After 2008 tariff reductions often

stayed while export measures eased

Alternatives to tariff reductions

• Trade policies may be second best but better than nothing?

• Alternatives

– stockholding

– productivity improvement/resilience

– reduce transactions costs – infrastructure etc

– safety nets

Trade policy and food price volatility in LIFDCs · •Price variations – cereal prices more than...

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