FROM THE POVERTY REDUCTION AND ECONOMIC MANAGEMENT NETWORK The World Bank Global Food Price Crisis— Trade Policy Origins

The current spike in global food prices has deep roots in decades of trade-distorting policies that have encouraged inefficient agricultural production in rich countries and discouraged efficient production in developing countries. High-income countries have historically protected their domestic producers and subsidized inefficient production—most recently biofuels—and dumped surpluses onto global markets. In turn, developing countries have often used trade and other domestic policies to simultaneously tax and protect their agricultural sector, with the net effect in many countries of taxing farmers. Overall, the world has suffered from declining agricultural prices, overproduction in high-income countries, and underproduction in poor countries. This has resulted in thinner global agricultural markets than otherwise would be the case, more volatility, and lower overall reserve supply capacity and food security. This note discusses the trade policy origins of the global food price crisis. A companion note reviews the trade policy options to deal with the crisis. World Trade Policies: