POLICY IMPLICATIONS OF PRICE DYNAMICS AND THE WAY FORWARD - Food Security, Food Prices and Climate Variability - page 178

Accomplishing these goals can improve food security in the face of environmental and eco-
nomic shocks. They are enormously challenging, and are basically the development agenda
for the coming decade.
Policy response to respond to food price volatility
While working to implement policies that enable development, countries also work to reduce
the impact of food price volatility on their populace. These are critical for the political sur-
vival of the leadership of many food insecure countries, including India and Haiti (Timmer,
2010). Governments cannot be seen to be doing nothing when food prices double over very
short periods (Poulton et al ., 2006). There are a number of policy responses that governments
can take to deal with food price spikes and volatility. They include:
• tradepoliciesthatfocusonstabilizingdomesticfoodpricesbysubsidizingimportswhen
world prices are high and tax imports when world prices are low for food importing
countries and restrict exports and subsidize imports for food exporting countries (termed
“countercyclical” trade policies) (Gouel, 2013);
• foodstoragecanreducetheimpactonpricesbychangesintheamountoffoodproduced
if supplies are released when food deficits occur and purchased by the stock holder when
food surpluses occur (Gilbert, 2011);
• implementationofvariablequantitysocialsafetynetsthatincreasesupportforthepoorest
populations during times of high food prices and reduce support during times of low
prices to protect consumption by the poor (Do et al ., 2013).
These policies are reviewed in Christophe Gouel's 2013 World Bank report on domestic
stabilization policies. Here our interest is in how observations of the impact of climate varia-
bility and local price movements can be used to improve prediction of food price movements.
Each of these policy responses will be examined as to how information on weather-related
production shocks and their likely impact on local food prices can improve policy implemen-
tation or provide insight that is currently lacking.
Countercyclical trade policies
Gouel (2013) describes trade policies that use import and export taxes and tariffs to change
food supply in response to changing local food prices. Approaches that such policies take
include import subsidies, tariffs, export controls, restrictions on food imports, marketing
boards, producer subsidies and other approaches that many economists and trade policy
experts do not recommend. These policies often work by harming trading partners or trans-
ferring risk to those nations forced to import food from elsewhere. Justifications for such
policies include lack of reliability in the international commodity market and lack of private
storage to minimize local price volatility, as well as the negative impact of price spikes on the
welfare of the poorest.
National trade policies that use the tactics described above can increase the price of food
in a country. Often the benefits of such policies accrue to large producers, not to consumers
or smallholders. Barrett and Bellemare (2011) argue that higher prices, not volatility, matter
to the food insecure. Price spikes that rapidly increase the price of food can cause civil conflict,