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September 2013

Non-Tariff Measures Raise Food Prices and Hinder Regional Integration in Central America

Jose Daniel Reyes's picture

A cow browses in Nicaragua. Source - www.flickr.com/photos/ajohndoeproject/3657141084/sizes/m/in/photostream/It is July 2012 and cattle farmers in Nicaragua are worried because Guatemala has enacted a series of laws that restrict beef trade. These so-called “non-tariff measures,” or NTMs, require that beef crossing the Guatemalan border meet stricter safety and labeling standards. The Guatemalan government argues that these measures protect the country’s consumers from health hazards. But the Nicaraguan farmers say they hurt business and unfairly shelter Guatemalan producers from competition. 

This is just one example of the debates that arise in the food industry in Central America and elsewhere. While it is laudable and good policy for a government to use legitimate, non-trade related legislation to protect its citizens from certain risks, governments can also use these measures to protect domestic industry. Regardless of their intention, in an increasingly globalized, competitive world, non-tariff measures increase the cost of doing business, impact prices, affect the competitiveness of the private sector, and impact the overall welfare of the economy.

A Lot of Homework and a Bit of Luck: How Some Southeast Asian Countries Snagged GVCs

Swarnim Wagle's picture

Samsung factory in Vietnam. Source - www.emergingfrontiers.com/wp-content/uploads/2012/05/samsungvietnamelectronics.jpgToday, four-fifths of world trade – worth around US$15 trillion – happens along global value chains (GVCs) coordinated by multinational enterprises (MNEs), or corporations that manage production or deliver products across several countries. These enterprises have always played an important role in connecting developing countries to world markets. The issue of what drives their location, and how much countries can do to become part of their value chains is, therefore, of enduring policy interest. We know that fundamentals help – investment climate, infrastructure, and cost of doing business are all important – but they are by no means a guarantee. Rather, serendipity and historical accidents have played major roles in the success or failure of many similar countries in Asia that tried to attract and keep the investment of MNEs. Can the history of global value chains tell us anything about the future? More to the point, is there anything developing countries can do to increase their chances of harnessing this engine of growth?

Beggar Thy Neighbor’s Beggars? Using Trade Policy to Moderate Food-Price Spikes May Hurt the World’s Poor

Will Martin's picture

Wheat. Source - World Bank. www.flickr.com/photos/worldbank/3633424588/sizes/m/in/photostream/Many countries use trade policy to protect their own consumers from spikes in international food prices. It turns out that this well-intentioned practice can actually do more harm than good. During food price spikes -- such as those in mid-2008, early 2011 and mid-2012 – governments restricted the export of food staples or lowered barriers to importing them. They hoped to keep their domestic prices of rice, wheat, maize, and oilseed low, reasoning that this would help their poor and stop people from falling into poverty. But there is new evidence that, while the practice kept each country’s domestic prices down relative to the world prices at the time, it contributed to the higher international prices that were the source of concern. In a World Bank Policy Research Working Paper, “Food Price Spikes, Price Insulation, and Poverty,” we explore this phenomenon and find that it did not reduce global poverty in 2008. On the contrary, we estimate it may have increased poverty slightly (by 8 million people).