The inefficiency and ineffectiveness of export restrictions
World market effects: Export restrictions during food price spike 2007/08
International prices for some agricultural commodities began to rise sharply in 2006. This initially occurred for wheat and maize, and subsequently for dairy products and oilseed crops. International market prices for these commodities more than doubled in nominal terms between the beginning of 2005 and the end of 2007, and continued to rise rapidly for some through the first six months of 2008 before starting to decline again in the latter half of that year. International prices for rice, which had been increasing at a slower pace, tripled between January and May 2008.
When world grain prices started rising sharply, several exporting countries attempted to stem the domestic food price inflation by restricting grain exports. Amongst those countries were China, India, the Russian Federation and Ukraine. Viet Nam, the second largest rice exporter, banned rice exports during the first few months of 2008. These export restrictions contributed to further world price rises in a situation where markets were already very tight (OECD, 2009). This in turn led to panic reactions amongst some importing countries that attempted to secure grain supplies. Countries in the Middle East began buying wheat on international markets in an attempt to replenish stocks. With prices already being high this pro-cyclical behaviour was not only costly for the buyers, but also contributed to further price rises. Other countries, such as Brazil, lowered import tariffs and started releasing grain stocks. Having lost their trust in the international markets, some tried to secure long term contracts with their suppliers. The Philippines, for example, concluded a three-year contract with Vietnam for the annual supply of 1.5 million tonnes of rice. Others, such as China, Korea and Saudi Arabia started buying or leasing land in other regions, mainly Africa, for the production of grains for their own exclusive supplies.