Food Prices and the Multiplier Effect of Trade Policy

Recommendation

Take-Aways

• Economists have long suspected that government trade policies play a role in “food crises,” which are “sudden and rapid spikes in food prices.”
• To protect consumers and producers, governments often implement various trade measures – such as export restrictions, import tariffs and quota reductions – to address food price shocks.
• A “multiplier effect” occurs when nations counter other countries’ actions with measures that nullify the initial response and force a spiraling series of trade actions. These multiplier effects risk subverting global food markets.

About the Authors