Why banning food exports does not work

Amid rising inflation and the spectre of shortages caused by the war in Ukraine, some food-exporting countries are shutting up shop. On May 23rd Malaysia banned the export of poultry. Earlier this month, India banned wheat exports. According to the International Food Policy Research Institute (IFPRI), a think-tank, at least 20 countries have imposed some sort of limit on exports since the war began. Taken together the restricted exports account for 10% of calories on the global market. The United Nations has urged countries to reconsider. Keeping calories flowing across borders, it argues, is the best way to ensure global food security and less-volatile prices. Do export bans work?

Their appeal for governments seems obvious. Food originally destined for export can be redirected to domestic markets, pushing down local prices. When food prices surged in 2007-08 following the financial crash, the closest recent parallel to today’s crisis, several countries quickly imposed export restrictions on many crops. Some studies suggest that was effective in keeping domestic inflation in check, according to Annelies Deuss, a researcher from the OECD, a club for mostly-rich countries.

Yet it can be tricky to distinguish the effect of export bans from other factors, such as governments releasing stocks of food or even the weather, which affects harvests. There is some evidence that export bans can have the opposite of their intended effect. For instance, farmers may hoard their products until the ban is lifted. Obie Porteus of Middlebury College in Vermont suggests that may have happened when five countries in southern and eastern Africa banned maize exports periodically during the 2000s. Prices were more volatile as a result. And in the long run export bans could encourage farmers to shift production to crops which are not restricted, reducing domestic output.

Moreover, even if domestic prices were to fall, that would not necessarily be a good thing. In developing countries large numbers of poor people rely on agriculture for their livelihoods. A study in 2013 by researchers at IFPRI found that maize-export bans in Tanzania may have increased the poverty rate because the decline in incomes of the poorest group in society outweighed any benefit from lower prices. Export bans tend to do more to help urban dwellers, who usually have more political clout than their rural compatriots in poor countries.

The impact on the countries imposing the bans are mixed, then. But for the rest of the world the effects are clear, and bad. Although small exporting countries may not have a great effect on global prices, big ones do. The global wheat price benchmark jumped by 6% the day after India announced its ban. And when one exporter puts up trade barriers, it can encourage others to do the same. In 2008 Vietnam banned rice exports which quickly prompted India, China and Cambodia to do so too. According to one estimate by researchers at the World Bank, the aggregate effect of export restrictions in that period was to increase the international price of rice by 52%. Countries may also retaliate with tit-for-tat limits on other products, pushing up food prices more broadly even if inflation on the original product is contained.

About 80% of the world lives in countries which are net importers of food. Economists suggest a better solution than export bans would be to bolster social safety nets while keeping trade open. The best way to do this would be to end the war in Ukraine, or at least allow its grain to move freely. Unfortunately, that seems unlikely in the near future.

Tags: wheat, IFPRI, India, Malaysia, inflation, food security, food, Ukraine, domestic, export, markets, prices, shortages, crops, banned, Poultry, global market