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Trade policy coordination and food price volatility

Author

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  • Gouel, Christophe
Abstract
Many countries adjust their trade policies countercyclically to food prices, to such extent that the use of export restrictions by numerous food exporters has occasionally threatened the food security of food importing countries. These trade policies are not consistent with the terms-of-trade motivation often retained to characterize the payoff frontier of self-enforcing trade agreements, as these policies can worsen the country’s terms of trade. 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 framework implies that importing and exporting countries have incentives to deviate from cooperation at different periods: exporter when prices are high and importers when prices are low. Since staple food prices tend to have positively-skewed distributions, with more prices below mean than above but with occasional spikes, a self-enforcing agreement generates asymmetric outcomes. Although an importing country suffers less in the trade war than an exporting country, this latter has larger incentives to deviate from a cooperative trade policy because positive deviations from mean price are larger than negative ones. Thus, because of the asymmetry of the distribution of commodity prices, it may be more difficult to discipline exports taxes than tariffs in trade agreements.

Suggested Citation

  • Gouel, Christophe, 2014. "Trade policy coordination and food price volatility," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182658, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:182658
    DOI: 10.22004/ag.econ.182658
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    2. Shon Ferguson & David Ubilava, 2022. "Global commodity market disruption and the fallout," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(4), pages 737-752, October.
    3. Tarek Ben Hassen & Hamid El Bilali & Mohammed Al-Maadeed, 2020. "Agri-Food Markets in Qatar: Drivers, Trends, and Policy Responses," Sustainability, MDPI, vol. 12(9), pages 1-31, May.
    4. Bradford, Scott C. & Negi, Digvijay Singh & Ramaswami, Bharat, 2022. "International risk sharing for food staples," Journal of Development Economics, Elsevier, vol. 158(C).
    5. Fabio Gaetano Santeramo & Emilia Lamonaca, 2019. "On the drivers of global grain price volatility: an empirical investigation," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(1), pages 31-42.
    6. 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 and Public Policy Working Papers 2016-16, University of Adelaide, School of Economics and Public Policy.
    7. Estrades, Carmen, 2015. "The Role of Export Restrictions in Agriculture Trade," 2015: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229229, International Agricultural Trade Research Consortium.
    8. Distefano, Tiziano & Chiarotti, Guido & Laio, Francesco & Ridolfi, Luca, 2019. "Spatial Distribution of the International Food Prices: Unexpected Heterogeneity and Randomness," Ecological Economics, Elsevier, vol. 159(C), pages 122-132.
    9. Valeria Borsellino & Emanuele Schimmenti & Hamid El Bilali, 2020. "Agri-Food Markets towards Sustainable Patterns," Sustainability, MDPI, vol. 12(6), pages 1-35, March.
    10. Marije Schaafsma & Ilda Dreoni & Lacour Mody Ayompe & Benis Egoh & Dewa Putu Ekayana & Arilson Favareto & Sonny Mumbunan & Louise Nakagawa & Jonas Ngouhouo‐poufoun & Marieke Sassen & Thiago Kanashiro , 2023. "A framework to understand the social impacts of agricultural trade," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(1), pages 138-150, February.
    11. Lusheng Shao & Derui Wang & Xiaole Wu, 2022. "Competitive trading in forward and spot markets under yield uncertainty," Production and Operations Management, Production and Operations Management Society, vol. 31(9), pages 3400-3418, September.
    12. Jayjit Roy & Manan Roy & Jessica Robinson, 2024. "Agricultural Trade and Food Security," Working Papers 24-18, Department of Economics, Appalachian State University.
    13. Steve McCorriston & Donald MacLaren, 2024. "Market intermediaries, storage and policy reforms," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(1), pages 114-136, February.
    14. 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.
    15. Laura Forastiere & Davide Del Prete & Valerio Leone Sciabolazza, 2020. "Causal Inference on Networks under Continuous Treatment Interference," Papers 2004.13459, arXiv.org, revised Jun 2023.

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    More about this item

    Keywords

    International Relations/Trade;

    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; Animal Welfare Policy

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