Food Crisis and Export Taxation. Revisiting the adverse effects of non-cooperative aspect of Trade Policies

In this paper, we focus on the use of food security as a justification for export taxation. During food crisis, governments of food-exporting countries are tempted to react to high food prices by restricting exports. This is to encourage local producers to sell food items domestically and to decrease local prices, which implies higher world food prices. This measure amplifies a food crisis and is typically a "beggar-thy-neighbor" policy. But in times of food crisis, food-importing countries also decrease import duties to decrease domestic food prices; this causes food demand on the world market to increase, further reinforcing the upwards pressure on world food prices. The combination of export taxes and reduced import duties increases the upward pressure on world prices when food prices are high. On the contrary, in times of low world agricultural prices, food-exporting countries may be tempted to decrease export taxes and food-importing countries to increase import duties. Trade policies make world markets structurally more volatile. We also focus on the institutional aspect and, in particular, why export taxes can be raised so easily. It appears that countries have a relatively large degree of freedom when implementing export taxes as the WTO does not prohibit export taxes and other forms of export restrictions.