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Trade barrier volatility and domestic price stabilization : evidence from agriculture

Author

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  • Anderson, Kym
  • Nelgen, Signe

Abstract

National barriers to trade are often varied to insulate domestic markets from international price variability, especially following a sudden spike. This paper explores the extent of that behavior by governments in the case of agricultural products, particularly food staples whose prices have spiked three times over the past four decades. It does so using new annual estimates since 1955 of agricultural price distortions in 75 countries, updated to 2008. Responses by food importers to upward price spikes are shown to be as substantial as those by food exporters, thereby weakening the domestic price-stabilizing effect of intervention by exporters. They also add to the transfer of welfare to food-surplus from food-deficit countries -- the opposite of what is usually thought of when considering inter-sector trade retaliation. Phasing down World Trade Organization-bound import tariffs toward their applied rates would help reduce the legal opportunities for food-deficit countries to raise their import restrictions when international prices slump. To date there is no parallel discipline in the World Trade Organization that limits increases in export restrictions when prices spike upward, however. Bringing such discipline through new World Trade Organization rules could help alleviate the extent to which government responses to exogenous price spikes exacerbate those spikes.

Suggested Citation

  • Anderson, Kym & Nelgen, Signe, 2010. "Trade barrier volatility and domestic price stabilization : evidence from agriculture," Policy Research Working Paper Series 5511, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5511
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    Cited by:

    1. Frank Jotzo & Steve Hatfield-Dodds, 2011. "Price Floors in Emissions Trading to Reduce Policy Related Investment Risks: an Australian View," CCEP Working Papers 1105, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.

    More about this item

    Keywords

    Markets and Market Access; Emerging Markets; Food&Beverage Industry; Economic Theory&Research; Climate Change Economics;

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