NUTR SCI 350 Lecture Notes - Lecture 20: Food Policy, World Trade Organization
04/18/18 lecture 20: Food policies
• Trade
o Small versus large country impacts are important to note.
o When the EU, Russia and U.S. are all subsidizing wheat production, this
depresses the world price for all grains in a significant way.
▪ makes it harder for importing nation production systems to compete
▪ can collapse the food systems of a fragile nation.
o WTO has tried to mitigate food subsidization with limited success.
o LDC nations commonly respond with tariffs to countervail the subsidies.
• Food subsidy stories
o Please read carefully stories about Sri Lanka, Bangladesh, India, Egypt,
Philippines, Southern Africa, Brazil, Venezuela . I will go through Sri Lanka and
Southern Africa.
o Bangladesh: Patchwork of policies evolving from WWII. Key problem was that it
was poorly targeted. Switched food policy to target poor families in a way that
encouraged sending children to school.
o India: Purchased imports off world market and sold at below market prices. Key
failure were food spoilage, administrative costs which acted to raise internal
prices of food. Second failure was corruption.
• Sri Lanka
o Subsidized Rice and Rationed it during WWII.
o By 1953, increased rice prices made holding price low very costly. Government
allowed price to rise by 300% riots and resignation
o 1954-1966 Returned to subsidies but managed the costs by greater
rationing. (1000/cals/day/person).
o 1966 Allowed subsided price to go to zero and further cut rationing.
o 1978 Started to Target subsidies to the poorest citizens. Shifted from quantity
based rationing to food stamps w/fixed rupee value.
o Over time, costs were reduced with inflation and further Targeting
o By 1984: only 4% of government expenditures were in the form of subsidies.
o Noted trend in broad policy that was very wasteful and poorly targeted to a
policy structure that really addressed the most acute needs.
• Southern Africa
o Policy mechanism was a government grain monopoly that paid farmers above
market prices and sold this supply to consumers at below market prices.
o Very costly leading to large gov. deficits. IMF forced the removal of these
subsidies in order to secure loans (carrot on stick policies)
o Undernutrition declined AFTER removing subsidies.
o Removing the subsidies freed up scarce capital to achieve other food objectives.
o Subsidies entrenched inefficient food channels from innovating.
o Prevented the natural entry of whole meal markets that were low priced
o See Table 19.3 on how poorly targeted subsidy program was.
o Review on global food aid and targeting.
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