Agricultural Trade and Food Security

Agricultural trade is vitally important for achieving the goal of ending hunger by 2030, as enshrined in the second Sustainable Development Goal. While trade is frequently seen as posing threats to this vitally important goal, it can in fact play a major role in achieving it. Trade helps in a number of ways, by allowing countries to take advantage of their radically different factor endowments, with land-abundant countries providing exports and land-poor countries taking advantage of much more efficiently-produced imports. Trade liberalization can also help by raising production efficiency in agriculture, allowing improvements in dietary diversity and increasing access to food. Allowing trade substantially reduces the volatility of food prices by diversifying sources of supply. By contrast, beggar-thy-neighbor policies of price insulation such as the imposition of export bans in periods of high prices redistribute, rather than reduce, volatility. However, the tendency of other countries to use price-insulating policies creates a serious collective action problem in world markets. Proposals for Special Safeguards would exacerbate these problems by adding massive duties—and creating even larger declines in world prices—during periods of already-depressed prices.

WORKING PAPER NO: 664