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Trade Policy Coordination and Food Price Volatility

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  • Christophe Gouel

Abstract

Many countries adjust their trade policies counter cyclically with foodprices,to the extent that the use by numerous foodexporters of export restrictions has occasionally threatened the foodsecurity of food importing countries.These tradepolicies are inconsistent with the terms-of-trade motivation often retained to characterize the pay-off frontier of self-enforcing trade agreements,as they can worsen the terms of trade of the countries that apply them.This paper analyzes trade policy coordination when trade policies are driven by terms-of-trade effects and a desire to reduce domestic food price volatility. This frame work implies that importing and exporting countries have incentives to deviate from cooperation at different periods:the latter when prices are high and the former when prices are low. Since staplefood prices tend to have asymmetric distributions,with more prices below than above the mean but with occasional spikes,a self-enforcing agreement generates asymmetric outcomes.Without cooperation,an importing country uses more frequently its trade policy because of the concentration of prices below the mean,but an exporting country has a greater incentive to deviate from a cooperative trade policy because positive deviations from the mean price are larger than negative ones.Thus,the asymmetry of the distribution of commodity prices can make it more difficult to discipline export taxes than tariffs in trade agreements.

Suggested Citation

  • Christophe Gouel, 2015. "Trade Policy Coordination and Food Price Volatility," FOODSECURE Working papers 29, LEI Wageningen UR.
  • Handle: RePEc:fsc:fspubl:29
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    Cited by:

    1. Brockhaus, Jan & Kalkuhl, Matthias, 2015. "Grain emergency reserve cooperation – A theoretical analysis of benefits from a common emergency reserve," 2015 Conference, August 9-14, 2015, Milan, Italy 212767, International Association of Agricultural Economists.
    2. Fabio G., Santeramo & Emilia, Lamonaca, 2018. "On the Drivers of Global Grain Price Volatility : an empirical investigation," MPRA Paper 86795, University Library of Munich, Germany.
    3. Wenshou Yan, 2016. "Political Economy of Trade and Storage Policies Coordination, and the Role of Domestic Public Storage in the World Market," School of Economics Working Papers 2016-16, University of Adelaide, School of Economics.
    4. Estrades, Carmen, 2015. "The Role of Export Restrictions in Agriculture Trade," Proceedings Issues, 2014: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229229, International Agricultural Trade Research Consortium.
    5. Estrades, Carmen & Flores, Manuel & Lezama, Guillermo, 2017. "The Role of Export Restrictions in Agricultural Trade," Commissioned Papers 256421, International Agricultural Trade Research Consortium.
    6. Tiziano Distefano & Guido Chiarotti & Francesco Laio & Luca Ridolfi, 2018. "Spatial distribution of the international food prices: unexpected randomness and heterogeneity," SEEDS Working Papers 0118, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jan 2018.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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