Feeding hunger and insecurity

5. The global response to high food prices: what is being done?5.2.2 Intervening in the MarketMarket interventions have been favoured by governmentsreacting to the pressures of high foodprices, largely because they are easy to implementand are highly visible. These were largely ofthree types: reducing import taxes on foods; targetingdomestic food prices by introducing foodsubsidies or price ceilings; or imposing export restrictions.Changing Import and Export TaxesTwenty-four of the fifty-eight countries sampledby the World Bank (2008c) in early 2008 reducedtaxes on imports and VAT. FAO (2008c) note thatthe average tariff on cereals averaged 8 percentamong the 60 countries sampled, meaning thateven the elimination of these taxes has limited impacton prices. Tax reductions may prove difficultto reverse, leading to significant reductions in governmentrevenue. However, maintaining high foodtariffs to protect domestic production, as practicedby the Philippines (World Bank 2008c), imposesadditional stress on the budgets and livelihoodsof poor households by marking-up prices. Moretargeted tax changes must be designed to protectconsumers without compromising the opportunityfor producers to benefit from high prices.Subsidies and Price CeilingsSome governments have moved to subsidise specificfoods, as seen in Yemen and Pakistan – supplyingsubsidised wheat on some markets and arationing card system, respectively (World Bank2008c). Other countries, like Morocco and Liberia,reacted by imposing a maximum sales price,or ceiling price for selected foods (World Bank2008c). Subsidising foods and imposing ceilingprices can be damaging, creating a gap betweenthe economic price of a good as dictated by supplyand demand and the actual price. While protectingconsumers, these interventions can lower producerprices and discourage domestic food production.Export RestrictionsIn the IFPRI (2008a) sample of 104 countries,30 imposed export restrictions in early 2008 toprotect domestic food security by increasing exporttaxes or limiting/prohibiting trade. Amongthese countries are a number of major food exporters,including India and China where riceexports (among other foods) were banned. Domestically,export bans and high export tariffs“tend to have a limited impact on domestic pricelevels and a significant negative effect on earningsfor domestic producers and exporters [removingthe market incentives for boosting foodproduction]” (World Bank 2008c:4). While, smallincreases in export taxes can help to maintaindomestic food sales and improve the governments’fiscal balance and macroeconomic stability,export restrictions can significantly impactfood prices in countries dependent on foodimports. Action Against Hunger’s researchersin Liberia and Sierra Leone revealed that bothcountries were facing declining terms-of-tradeand greater domestic food prices because ofrice export restrictions in China. More must bedone to discourage governments from imposingshort-sighted and potentially damaging marketinterventions which exacerbate the effects ofhigh food prices in other countries and limit domesticfood production.5.2.3 Boosting Agricultural ProductionIn the long-run, agricultural production must beincreased sufficiently to meet the needs of theglobal population. Many of the market interventionsmentioned above suppress the normalmarket stimuli encouraging an increase in foodsupply. However, some countries have alreadytaken strides to boost domestic food production,increasing the budget of the ministry of agricultureor providing subsidised seeds and fertilisers.Improved infrastructure connecting domestic andglobal markets, more effective risk managementsystems and improved market information systemsare all likely to play a part in restoring globaland local food security. More effort is needed tofind an appropriate method to disseminate up-todateresearch in agriculture to farmers in developingcountries.ACF International Network Feeding Hunger and Insecurity 45