How do trade policies and tariffs affect global agricultural markets and food prices?

Dear Md Mostafizur Rahman,

The direct effect of tariffs is to make imported goods more expensive domestically than on the world market, an effect that is also observed in the case of export subsidies, according to Krugman & Obstfeld (2005). In both cases, there is a stimulus to the internal production of the good object of the instrument. Protectionism, whether done through subsidies or tariff barriers, ends up depressing international prices and destabilizing the market.

According to Love and Lattimore (2009), trade liberalization by developed countries alone would already imply a gain of US$ 122.44 billion for the world economy and total liberalization would generate a gain of around US$ 173.56 billion. Therefore, a complete elimination of tariffs and a reduction in trade costs would result in more than half of the benefit accruing to developing countries, bringing welfare gains equivalent to 1.37% of GDP in these countries and 0.37 % of GDP in developed countries.

Chandan Kumar

Md Mostafizur Rahman Dear Rahman, you can have a look at many of my research papers on trade policies and agri-trade. It is with respect to developing country India. You can explore many interesting findings here.

i. Kumar, C., & Bharti, N. (2021). Post-SAFTA NTMs for Agro-Trade: Revelations from India-South Asia approach. Foreign Trade Review, vol. 56, issue no. 1, pp. 117-135. (Sage publishers). (ABDC- B, Impact Factor: 1.3, Scopus, ESCI, UGC Care Group I).

https://doi.org/10.1177/0015732520961309

ii. Kumar, C., & Bharti, N. (2020). Why NTM is a challenge in trade relations? Evidence from India-Africa Agricultural Trade. Insight on Africa, vol. 12, issue no. 2, pp. 79-103. (Sage publishers). (Impact Factor: 0.8, Scopus, ESCI, UGC Care Group II).

https://doi.org/10.1177/0975087819898582

iii. Kumar, C. and Bharti, N. (2018). Indo-European Union Agricultural Trade: Trade Restrictions and SPS Measures. Obuda University e-bulletin, vol. 8, issue no 1, pp. 13-23. (International peer reviewed journal)

http://uni-obuda.hu/e-bulletin/Chandan_Nalin_12.pdf

i. Kumar, C., & Bharti, N. (2022). India-Australia Agricultural Trade: Recent Trade Restrictions. Available at:

https://ssrn.com/abstract=4721307

ii. Kumar, C. (2023). Theoretical Background of NTMs. Available at: https://dx.doi.org/10.2139/ssrn.4822089

iii. Kumar, C. (2023). NTMs in Agriculture: Global Scenario of India. Available at: https://dx.doi.org/10.2139/ssrn.4820574

Chuck A Arize

ChatGPT

Trade policies, including tariffs, have significant impacts on global agricultural markets and food prices. Here’s how:

Tariffs and Trade Barriers:Price Effects: Tariffs imposed on imported agricultural products raise their prices in the importing country. This can lead to higher domestic prices for consumers, depending on the elasticity of demand and supply. Impact on Imports: Higher tariffs reduce the quantity of agricultural imports, as they become more expensive for domestic consumers and businesses. This can protect domestic producers but may reduce consumer choice and increase prices. Export Markets: Tariffs imposed by other countries on exports can reduce demand for domestically produced agricultural goods in international markets, potentially lowering prices for domestic producers.

Subsidies and Support Programs:Price Distortions: Agricultural subsidies provided by governments can distort global agricultural markets by artificially lowering production costs for domestic producers. This can lead to overproduction and lower global prices, affecting farmers in other countries who may not receive similar subsidies. Competitiveness: Subsidies can make domestic agricultural products more competitive internationally, potentially displacing producers in countries where subsidies are less prevalent.

Market Access and Trade Agreements:Market Openness: Trade agreements that reduce tariffs and other trade barriers promote greater market access for agricultural products. This can lead to increased trade volumes, efficiency gains, and potentially lower prices for consumers. Standardization: Harmonization of regulations and standards through trade agreements can facilitate smoother trade flows and reduce costs associated with compliance, benefiting both producers and consumers.

Supply and Demand Dynamics:Production Shifts: Changes in trade policies can alter the production decisions of farmers globally. For instance, reduced tariffs on imported agricultural goods may lead to decreased production in countries that face stiffer competition from lower-cost imports. Price Stability: Trade policies that promote stable and predictable trade flows can contribute to price stability in global agricultural markets, benefiting both producers and consumers.

Global Food Security:Access to Food: Trade policies influence the availability and affordability of food products globally. Lower trade barriers can improve access to food in regions where domestic production is insufficient or impractical due to climate or other constraints. Risk Management: Diversified sources of food through international trade can mitigate risks associated with local production failures, ensuring more stable food supplies globally.

In conclusion, trade policies and tariffs play a crucial role in shaping global agricultural markets and food prices. They affect production decisions, market access, prices for consumers, and the overall stability and efficiency of agricultural trade. Balancing these policies is essential to promote fair competition, support sustainable agricultural practices, and ensure food security on a global scale.

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