On almost every continent, nations have imposed new restrictions and restrictions on products ranging from wheat, corn and edible oils to beans, pulses and sugar. Lebanon has also banned the export of ice cream and beer.
The cascade of sanctions is another blow to unfettered global trade, which has been hit in recent years by tariff and regulatory disputes between the US and China and steps countries have taken to protect supplies of medical equipment and vaccines during the coronavirus pandemic. went.
For governments, limiting food exports is a way of quelling public anger over rising prices and boosting domestic supplies, especially after Russia’s invasion of Ukraine disrupted global food markets and increased prices for many commodities. after increasing. Both countries are major exporters of cereals and vegetable oils.
However, economists say that experience has shown that restrictions on food exports inevitably push up global prices as importers tend to buy what they can with less supply. While governments may get some relief from rising prices, they are rarely significant or long-lasting, with farmers usually responding by limiting production or switching to other crops that attract better prices at home and abroad. We do.
“It’s one of these classic things where there’s really a short-term sugar high for the government,” said Simon Event, professor of international trade and economic development at St. Gallen’s University in Switzerland. “And then you end up with the same scarcity problem you had before.”
Global food prices in April were 30% higher than a year earlier, according to an index published by the Food and Agriculture Organization of the United Nations. Meat prices rose 17%, grain prices such as wheat and corn rose 34% and vegetable oil prices were up 46%.
Unlike tariffs and other import restrictions, export restrictions on food are not covered by commitments made by countries under various WTO agreements.
Most countries say the restrictions are temporary, lasting a few months on average or until the end of the year. Indonesia said on Thursday it would lift restrictions on palm oil exports this week, while others such as Argentina, Moldova and Hungary have already lifted restrictions on exports of some products they imposed earlier in the year.
Malaysia’s government said on Monday it would halt exports of 3.6 million chickens a month starting June 1, citing tight supplies and high prices. Prime Minister Ismail Sabri Yacoub said, “The priority of the government is the people.” India, which imposed restrictions on wheat exports earlier this month, said on Wednesday that it will set a limit on sugar exports between June 1 and October 31.
Indonesia, which produces about 60% of the world’s palm oil, banned the export of many palm-oil products in late April to fight rising home cooking oil prices. The decision exacerbated the global shortage of edible oils after the war cut exports of sunflower oil from Ukraine.
On Thursday, Indonesian President Joko Widodo said that in the weeks since then, domestic cooking oil prices have fallen by about 10% and local supplies have become more plentiful.
Globally, however, palm-oil prices are rising again after falling from their March highs. According to the Malaysian Palm Oil Council, a metric ton of crude palm oil on Monday stood at $1,426, up 2.4% from the week. Malaysian prices are often used as a proxy for global prices. This is 6% lower than the average daily value in March, but 17% higher than the daily average in January.
Even in Indonesia, prices remain well above the government’s target of around $1 a litre, causing difficulties for many Indonesians. A liter of cooking oil today costs about $1.20, according to government data, which is about 15 cents less than in April, but about 30 cents more than a year ago.
Siyari Kusumastuti, who sells spring rolls outside her home on the outskirts of Jakarta, has started charging extra for her fried snacks. “Expensive cooking oil carries the burden of high daily costs,” she said, adding that most Indonesian cuisine calls for vegetable oil.
Still, farmers were pushing for the government to lift the ban, saying mills were offering them little money for their palm fruit as there were no export opportunities.
“More than half of my income is gone. Try to imagine, how can I pay for fertilizer?” said Tatoka Sugiarto, who grows palm oil on about 90 acres of land on the Indonesian island of Sumatra. He expressed satisfaction after the ban was lifted.
Overall, 26 countries have implemented some form of export ban on food or fertilizer in 2022, according to the International Food Policy Research Institute in Washington, D.C. Sanctions on exports as well as complete restrictions on taxes and special licensing regimes Are included.
This is higher than the height of the Covid-19 pandemic in 2020, but lower than in 2008, when 33 countries imposed sanctions after a drought and high oil prices raised concerns over food inflation and supply.
According to the institute, almost all the new sanctions came into force after Russia invaded Ukraine in February and remained in force in 23 countries as of Tuesday. Advanced economies including the US, Japan, the UK and Australia have also imposed export restrictions on food, although their measures are aimed solely at Russia as part of wider sanctions against Moscow for its invasion.
Dozens of products have been affected due to export restrictions. Argentina has banned beef exports. Ghana has banned the export of corn, rice and soybeans. Iran has banned the export of potatoes, brinjals and tomatoes. Egypt has stopped exporting beans, olive oil, red lentils, wheat, corn and cooking oil.
All those countries are battling high inflation. Annual inflation in Egypt stood at 13% in April, according to data provider CEIC. In Ghana, it was 24%; in Iran, 36%; In Argentina, 58%. In Lebanon, annual inflation reached 207% last month.
An analysis of past crises shows that trade sanctions drive up global prices. A paper published in 2012 looked at the years 2006 to 2008, when the price of rice rose by 113%. The authors found that forty percentage points of that increase could be attributed to changes in trade policy.
Export restrictions can create other problems. India’s ban on wheat exports this month surprised traders. At one point last week, more than 4,000 trucks carrying wheat were stuck in queues outside a port in the western state of Gujarat’s Kutch district for several days.
“There is total chaos at the port,” said Sanjay Mehta, chairman of the Deendayal Port Authority, which manages the port.
Economists say the bigger risk now is that export restrictions continue to mount, putting more pressure on global prices.
“There is an incentive for other countries to have similar policies for similar reasons, and so this exacerbates the problem and drives up food prices further,” said Michel Ruta, chief economist at the World Bank for Macroeconomics, Trade and Investment.
The longer such restrictions remain in place, and the more countries involved, the longer it will take for prices to stabilize, said Kim Anderson, emeritus professor of economics at the University of Adelaide in Australia, one of the authors of the 2012 paper. since a. On the effect of trade policy on food prices.
“Countries act as if they are individuals when cooperation will serve them better,” he said.