In a new policy outlook, Sandra Polaski re-examines conventional wisdom about rising food prices, their impact on global poverty, and how trade policy should respond. She finds it is largely wrong.
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Published on May 22, 2008
WASHINGTON, May 22—A new analysis of rising food prices finds that although many of the world’s poor will require urgent assistance, more are likely to gain than lose. It also recommends how the Doha Round negotiations, which might soon produce a deal, could help by:
allowing developing countries the policy tools they need to build up their own agricultural sectors; and
shielding the poor from market failures that can affect their very survival.
In a new policy outlook, Rising Food Prices, Poverty, and the Doha Round, Sandra Polaski re-examines conventional wisdom about rising food prices, their impact on global poverty, and how trade policy should respond. She finds it is largely wrong.
Polaski reviews the causes of high food prices that are susceptible to action by governments, including several that grew out of past policy mistakes. She then presents recent evidence on how food prices affect the poor.
Polaski points out that all sophisticated models of the Doha Round conclude that it would raise food prices modestly, but she argues that a carefully crafted agreement could nonetheless play a positive role in improving global food security and reducing future hunger and poverty. However, proper diagnosis of the problem will be required to avoid counterproductive measures that could have disastrous results.
Key Conclusions:
Because the impact of rising food prices varies widely from country to country and for different types of households, Polaski emphasizes the importance of avoiding a one-size-fits-all policy prescription that could make matters worse.
Earlier episodes of trade liberalization that removed flexibility from the hands of developing country governments or led them to rely on global food markets and not invest in their own agricultural sectors have now shown themselves to be extremely shortsighted.
The Doha Round must rebalance the rules so that poorer farmers can join regional and global markets as they gain the capacity to compete, while developing countries retain the policy tools needed to increase production and shield poor households from the worst global volatility.
Sandra Polaski is a senior associate and director of the Trade, Equity, and Development Program at the Carnegie Endowment. Polaski served as the U.S. Secretary of State’s special representative for International Labor Affairs, the senior official representing the State Department on international labor matters.
The Trade, Equity, and Development Program undertakes analysis and promotes policies and strategies to make global economic integration work for more countries and more people. The program focuses on developing countries and its ground level approach is unique among think tanks and development institutions.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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