Trade policy and food price volatility in LIFDCs David Hallam Food - PowerPoint PPT Presentation

Trade policy and food price volatility in LIFDCs David Hallam Food and Agriculture Organization Conference on Food Price Volatility, Food Security and Trade Policy, World Bank 18-19 September 2014

Overview • LDCs and NFIDCs 2011 proposal for WTO work programme • Trade policy changes, especially import tariffs, and some of their effects • Focus on LIFDCs and cereals • Based on different pieces of FAO work • Draw attention to some FAO information resources – GIEWS price tool and FAPDA

100.0 150.0 200.0 250.0 300.0 50.0 FAO Food and Cereal Price Indices (2002-4=100) 0.0 1/2005 4/2005 7/2005 Food 10/2005 1/2006 4/2006 7/2006 10/2006 1/2007 4/2007 7/2007 10/2007 1/2008 4/2008 7/2008 10/2008 1/2009 4/2009 7/2009 10/2009 1/2010 4/2010 7/2010 10/2010 1/2011 4/2011 7/2011 10/2011 1/2012 4/2012 7/2012 10/2012 1/2013 4/2013 7/2013 Cereals 10/2013 1/2014 4/2014 7/2014

Features of LIFDCs • Diversity of 55 LIFDCs within classification including in policy responses • Low self-sufficiency (around 70%) – reflects low productivity etc • Declining importance of food aid shipments • Increased dependence on international markets and vulnerable to international shocks, including policy shocks • Trade balances emphasize cereals followed by oils and sugar where price hikes greatest

Low income food deficit countries food trade 120000000 100000000 80000000 60000000 Import Value (1000 $) Export Value (1000 $) 40000000 20000000 0

Low income food deficit countries net cereal trade 30000000 80000000 70000000 25000000 60000000 20000000 50000000 tonnes $000 15000000 40000000 30000000 10000000 20000000 5000000 10000000 0 0 Net trade ($000) Net trade (tonnes)

LIFDC cereal import bill ($bn) 45 300.0 40 250.0 35 30 200.0 2002-4=100 25 $billion 150.0 20 15 100.0 10 50.0 5 0 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 LIFDC cereal import bill FAO Cereal price index

GIEWS price and policy information • The first version of the GIEWS Food Price Data and Analysis Tool released March 2009. Now on third version • Monthly retail and wholesale prices for staple food commodities (cereals, pulses , meat, fish ...) in selected markets in each country • 1130 monthly domestic price series in 82 countries • 28 international cereal export price series • 20 different food commodity categories • Price tool for graphics, statistical analysis etc

10 15 20 25 30 35 40 45 Philippines Rice Prices (regular milled, Philippine Peso/Kg) 0 5 Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Retail Wholesale

1000000 1500000 2000000 2500000 3000000 Tanzania domestic rice price 500000 0 Jan-06 Apr-06 Jul-06 Tariff reduced to zero January 2008 Oct-06 Jan-07 Apr-07 Tanzania, Dar es Salaam, Rice, Wholesale, (Tanzanian Shilling/tonne) Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14

LIFDC trade policy responses • Trade policies seen as quick and cheap way of augmenting supplies and slowing price increases • Conscious of consumer (reduced import tariffs, export restrictions) versus producer (import restrictions) interests and trade policies shifted to favour each at different times • 60% of countries reduced import tariffs in 2007/8 • Import subsidies beyond budgets • Import restrictions – not common, seasonal, periodic • Export restrictions – even in food importers • Responses after 2007/8?

LIFDC applied tariffs and tariff revenue 2006 Rice 300.0 Philippines 250.0 Tariff revenue, mn USD Nigeria 200.0 150.0 100.0 50.0 0.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Weighted average tariff, %

LIFDC applied tariffs and tariff revenue 2006 Maize 25.0 Tanzania 20.0 Tariff revenue. mn USD 15.0 10.0 5.0 0.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Weighted average tariff, %

LIFDC applied tariffs and tariff revenue 2006 Wheat 80.0 70.0 Nigeria 60.0 Tariff revenue, mn US$ 50.0 40.0 30.0 20.0 10.0 0.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Weighted average tariff, %

FAPDA policy data base • Food and Agriculture Policy Decision Analysis (FAPDA) - collection and dissemination of information on policy decisions to policy makers but also as a public good. • FAPDA analyses aim to promote coherent and effective food and agriculture policies. • FAPDA web-based tool tracks national food and agriculture policy decisions in more than eighty countries; • More than 6000 policy decisions since 2008, classified (consumer, producer, trade) and documented • http:/www.fao.org/economic/fapda/tool/Main.html • Developed from GIEWS (ISFP) policy review which continues as part of the price data base • Information sources

FAPDA policy report (part) – Tanzania 15/04/2010 Export prohibition A cereal export ban that was imposed in 2008, has been lifted in 2010. Availability of Food 20/11/2009 Entry into force of a free (or preferential) The Protocol on the Establishment of the East African Community (EAC) Availability of Food trade agreement Common Market entered into force on 1 July 2010, following ratification by all the five Partner States: Burundi, Kenya, Rwanda, Tanzania and Uganda. The Protocol was signed by the Heads of States on 20 November 2009, coinciding with the 10th Anniversary celebrations of the revived Community. 01/11/2009 Export prohibition Cereal export ban that was imposed in 2008 is still in force. Availability of Food 01/08/2009 Other export promotion measures The Kilimo Kwanza (Agriculture First) under pillar No.9 : Infrastructure Availability of Food Development for Kilimo Kwanza included finalization of the construction of Mwanza Airport runway extension to share chartered flights from KIA through Mwanza to Europe and facilitate the exports of horticulture and fishery products. The Kilimo Kwanza ( Agriculture First) is a national resolve to accelerate agricultural transformation. It comprises a holistic set of policy instruments and strategic interventions, this initiative is a central pillar in achieving the country’s Vision 2025 launched by H.E. Jakaya Mrisho Kikwete, President of the United Republic of Tanzania. 01/07/2009 Share of agricultural expenditure in the For the Tanzanian FY 2009/10 the government allocated for agriculture Availability of Food National Budget (increased or decreased) Tsh 666.9 billion, showing an increase of 30 percent compared to Tsh 513.0 billion in 2008/09 including of EPA resources. 01/07/2009 Import Tariff Reduced As the wheat production in the region could not meet the demand, import Availability of Food tariff on wheat has been applied at a reduced 10 percent rate (instead of 35 percent) 01/05/2009 Export prohibition Export ban to its neighboring country, in particular Kenya, is and will Availability of Food remain in force in the foreseeable future. 01/07/2008 Share of agricultural expenditure in the In the FY 2008/09 the Government allocated for agriculture Shillings Availability of Food National Budget (increased or decreased) 460.0 billion, compared to Shillings 379.0 billion in 2007/08. The larger amount of the budget allocated for agriculture will be spent on fertilizer subsidies, the Special Grain Reserve (SGR), research particularly on improved seeds, and training. 01/01/2008 Export prohibition Faced with high food prices in 2008 and in an attempt to maintain food Availability of Food security, the Tanzanian government established a ban on maize exports at the beginning of 2008. 01/01/2008 Tariff Faced with high food prices in 2008 and in an attempt to maintain food Availability of Food security, the Tanzanian government removed the import duty on cereals, and had in place a zero import duty policy for maize until May 30, 2008.

Africa import tariff changes post 2007-8 Pre 2007-8 policies Tariff reduction Variable trends Tariffs reintroduced maintained maintained after 2007-8 after 2007-8 after 2007-8 Import ban Import quota Lesotho* Algeria (durum wheat) Mali (rice) Burkina Faso (rice) Nigeria Zambia Togo** Sierra Leone (rice) Nigeria Senegal (rice, wheat) Algeria Kenya Ethiopia* Liberia (rice) Morocco Mauritania (rice)*** Zambia South Africa (wheat and Ghana (rice, maize, Egypt wheat flour) wheat) Cameroon (wheat, Mozambique** DRC (basic foods) wheat flour, rice) Rwanda (wheat, maize) Kenya (wheat, maize) Tanzania (wheat, cereals) Zimbabwe (maize) Uganda (wheat) Chad, Tunisia **** Malawi (wheat flour) * no taiffs for basic foods ** tariffs maintained throughout period ***tariffs maintained at lower level

Implementing tariff reductions • Policy reductions or suspensions • Persistent reduction or unpredictable ad hoc changes eg Nigeria • Often late and inadequate to cover price increases • Loss of tariff revenue • Widened margins? • Effects on producers • Impact on international prices?