NUTR SCI 350 Lecture Notes - Lecture 20: Food Policy, World Trade Organization

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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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