International Food Trade Policies and Poverty

The current issue of the Economist magazine has an interesting tutorial. Food prices have spiked, but are likely to continue high into future years. If food prices go up, one may assume that farmers make more income and consumers spend more on food. But what is the net effect on poverty in developing nations? Most people in the world now live in urban areas, and thus one might expect that the effect of policies such as agricultural subsidies in developed nations would reduce food prices and decrease poverty, while tarriffs would increase food prices and thus increase poverty. According to World Bank studies, the net effect of these policies will depend on the country involved, and the relative numbers of poor farmers who buy and sell food and of non-farm consumers.

Big surprise that the effects of food related policies on poverty are complex. Still, many years ago when I had the opportunity to sit in on the U.S. agricultural policy committee I discovered that members of that committee did not understand even simple linkages between food and feed grain policies. Still, in the current situation, it is important that policy makers work carefully to limit the hunger caused by the current food price increases.


Here are the original papers on which the Economist article is based:

• “Are Low Food Prices Pro-Poor? Net Food Buyers and Sellers in Low Income Countries” by M. Ataman Aksoy and Aylin Isik-Dikmelik. World Bank (forthcoming)
• “Distributional Effects of WTO agricultural reforms in rich and poor countries” by Thomas Hertel, Roman Keeney, Maros Ivanic and Alan Winters. Economic Policy, April 2007
• “Implications of Higher Global Food Prices for Poverty in Low-Income Countries” by Maros Ivanic and Will Martin. World Bank Policy Research Working Paper No 4594, April 2008