AARES CONFERENCE MEDIA RELEASE
Protectionist trade actions don't help the poor
Friday 13 February, 2015
Trade policy adjustments to insulate domestic markets when world food prices spike have been ineffective in dealing with
food price shocks that exposed millions of people to poverty in developing countries, a World Bank researcher told a New
Zealand agricultural economics conference this week.
Dr Will Martin, the manager for agriculture and rural development research in the World Bank is an Australian who has
worked for the Washington-based World Bank for the past 25 years. He is also President-Elect of the International
Association of Agricultural Economists. He was speaking to more than 250 international delegates attending the
Australian Agricultural & Resource Economics Society's conference in Rotorua this week.
His analysis of detailed expenditure and agricultural production data from 31 developing countries assesses the impacts
of changes in global food prices on poverty in an effort to understand their impacts on the poor.
Food price increases unrelated to productivity changes in developing countries raise poverty in the short run in all but
a few countries. "That's because the poor spend large shares of their incomes-- frequently about 60-70 percent--on food
and many poor farmers are net buyers of food," he says.
"However, in the longer run, if prices stay high, two other important factors come into play. Poor workers are likely to
benefit from increases in wage rates for unskilled workers resulting from higher food prices, and poor farmers are
likely to benefit from higher agricultural profits as they produce more food. As a result, higher food prices appear to
lower global poverty in the long run."
He says a natural and understandable policy reaction for many countries when food prices rise is to lower domestic
prices through levies on exports, temporary import tariff reductions, or import subsidies. "But these are
beggar-thy-neighbour policies that push up world prices," he says. He estimates that these policies accounted for nearly
half the increase in world rice prices in 2007-8. Individually, most countries took action that reduced the impact of
higher world prices on the poor. But, when the contribution of these policies to the higher world prices is taken into
account, they turn out to have been ineffective.
"What countries need is a collective approach that enables relatively open trade to continue in those circumstances.
Clearly, this still needs to be combined with social safety nets so poor people can cope in the short term, but then
realise the longer term benefits of higher prices. We need to deliver policies that actually work rather than policies
that appear to work."
Dr Martin says countries need to develop this 'social safety net' so the poorest can get access to what they need when
they need it.
He says the World Trade Organisation (WTO) showed with the abolition of variable import levies in the Uruguay Round that
it can introduce trade policies that bring about the kind of collective action needed to tame food price spikes.
"The collective agreement of the EU-US over export subsidies in the Uruguay Round also showed what can be done when
there is clear recognition of the problem. It's much more complex when many more countries are involved but we need to
keep working away at the challenge if we are to make progress. Getting the confidence of policymakers to act differently
will require a lot more research and policy formulation."