Is freer trade the answer to the food crisis?
Economist and blogger Tyler Cowen sallies forth in the Sunday Times to offer a solution to high prices and shortages of key staple foods: more trade. The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is ...
Economist and blogger Tyler Cowen sallies forth in the Sunday Times to offer a solution to high prices and shortages of key staple foods: more trade.
The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world's rice production is traded across borders; that's unusually low for an agricultural commodity.
So when the price goes up — indeed, many varieties of rice have roughly doubled in price since 2007 — this highly segmented market means that the trade in rice doesn't flow to the places of highest demand.
Economist and blogger Tyler Cowen sallies forth in the Sunday Times to offer a solution to high prices and shortages of key staple foods: more trade.
The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity.
So when the price goes up — indeed, many varieties of rice have roughly doubled in price since 2007 — this highly segmented market means that the trade in rice doesn’t flow to the places of highest demand.
It’s a good piece, but Harvard economist and free-trade skeptic Dani Rodrik takes Cowen to task for allegedly forgetting that rice prices in producer countries would likely go up if their farmers exported more. Cowen disagrees; Rodrik writes in Cowen’s comment section, “Free trade in rice would do little to alleviate the food crisis we are facing, and in fact would probably make it worse in the short run as it would result in a further increase in the real price of rice on world markets.”
All I wish to point out here is that many countries are already reducing tariffs on imported foods, if not rice specifically. According to the World Bank, some 24 of 58 surveyed (pdf) have done so, including India, Peru, Turkey, Mongolia, and Burkina Faso. Perhaps it’s only a matter of time before other countries do so as well.
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