This piece first appeared in Barron's on April 8.
The war in Ukraine has triggered an alarming global surge in government controls on the export of food. It’s critical for policymakers to halt the trend, which is making a global food crisis more likely.
latest data. History shows that such restrictions are counterproductive in the most tragic ways. A decade ago, most notably, they exacerbated the global food crisis, driving up wheat prices by a whopping 30%.By the end of March, 53 new policy interventions affecting food trade had been imposed—of which 31 restricted exports, and nine involved curbs on wheat exports, according to the
Food crises are bad for everyone, but they are devastating for the poorest and most vulnerable people. This is because of two reasons. First, the world’s poorest countries tend to be food-importing countries. Second,Many households pawned family valuables to buy food.
For now, despite the speed with which they were mounted, export and import controls are not nearly as extensive as they were a decade or so ago.But conditions are ripe for a retaliatory cycle in which the scale of restrictions could grow rapidly.
Trade measures are already having a visible effect on food prices. Russia has imposed restrictions on wheat exports to countries outside the Eurasian Economic Union. Smaller exporters, such as Serbia and North Macedonia, have also imposed restrictions. So have food-importing countries such as Egypt, which imports 80% of its wheat from Russia and Ukraine and has been worried about re-exports. These measures alone cover 16% of world trade and have been responsible for a seven-percentage-point increase in world wheat prices. That amounts to about one-sixth of the overall price surge.
The surge in trade interventions in March could be a sign of supply disruptions ahead. Food export restrictions imposed in March were nearly double of the number in the two preceding months. Restrictive export measures reduce global supply, causing higher prices. That triggers new export restrictions to contain domestic price pressures, generating a “multiplier effect” on international prices. If any of the top five exporters of wheat were to ban exports, the cumulative effect of these measures would be to increase the world price by at least 13%—and much more if others react.
It’s time to defuse the danger. A global food crisis is by no means inevitable: Despite the extraordinary rise in food prices recently, global stocks of the three major staples—rice, wheat, and maize—remain high by historical standards. The G7 took an important step recently by pledging not to impose food-export bans and to use “all instruments and funding mechanisms” to bolster global food security. That group already includes several of the largest exporters of key staples—including the U.S., Canada, and the European Union. Other major food exporters—among them, Australia, Argentina and Brazil—should join in that commitment.
Maintaining global flows of food, especially in a time of rising economic and geopolitical stress—should be a minimum requirement for policymakers everywhere, the equivalent of the do-no-harm rule. An uninterrupted supply of food benefits the citizens of all countries. It will also give national policymakers a much better shot at overcoming all the other shocks caused by the war in Ukraine.
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