Return to protectionism

Return to protectionism
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First Published: Thu, Apr 17 2008. 12 58 AM IST

Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Thu, Apr 17 2008. 12 58 AM IST
What the Doha Round of trade talks could not achieve, the massive rise in food prices has. Or so it is claimed. Countries in almost all continents have reduced tariffs on politically sensitive agricultural commodities, something that remained elusive after many rounds of negotiations.
Illustration: Jayachandran / Mint
That’s only the partial truth. The fact is we are nowhere near free trade. If import tariffs on foodgrains and other food items have been reduced, barriers on their export have been erected as well. In fact, it’s a return to a beggar-thy-neighbour policies, with a changed direction.
What has altered is the political basis of such tendencies. It’s no longer to wall infant industries from foreign competition. It’s protecting the “interests” of consumers, most of whom are urban dwellers and tend to be politically volatile. Protests over high prices in Egypt, Haiti, Mexico, Indonesia and Côte d’Ivoire were mostly urban. When forced to choose between producer interests and government stability, the choice is obvious and so are the economic results: export barriers. These barriers have been erected not only by poor, low-production countries, but also by major grain exporters — Russia, Argentina, Ukraine, Thailand and India.
This will only deteriorate the food availability situation. Key availability indicators show this clearly. The ratio of grain export stocks to their total disappearance (domestic consumption and exports) is set to deteriorate for wheat, rice, cereals and coarse grains. In case of wheat the ratio is set to dip from 15% in 2006-07 to 10.6% in 2007-08. Rice is likely to hover around 16%, unchanged from last year. Another indicator is the ratio of world cereal stocks to utilization. This is unlikely to improve in 2008-09 though production is expected to pick up this year.
This hits the poor everywhere. An example is the increasing minimum export price of rice in India. It has gone up from $425 per tonne in October to $1,000 by March-end. The country most affected is Bangladesh that bought rice at a discounted, but still painful, price of $430 per tonne. India, too, is suffering: It had to import wheat at high prices last year. No one is immune.
There are no gains, political or economic, in this situation. Farmers cannot gain from high prices due to export bans and consumers have no respite because the price of food is difficult to tame with these policies prevalent worldwide.
Is the world turning protectionist? Write to us at views@livemint.com
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First Published: Thu, Apr 17 2008. 12 58 AM IST
More Topics: Ourviews | Doha Round | Egypt | Haiti | Mexico |