Optimal Sub-Saharan and European trade policy response to the use of the food weapon by Russia: do regional taste variations count?

Yacine Ouahioune

No 2023-08, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: Short-term trade restrictions amidst world geopolitical crises have greatly contributed to recent global surges in staple prices. Non-cooperative trade policies such as exports bans in 2022 fed into debates about the relationship between food security and trade: although trade is essential to ensure sufficient supply in net-importing countries, it also makes them more vulnerable to external supply shocks. This essay thus examines the mechanisms at play in the diffusion of supply shocks through trade networks, in order to draw conclusions relevant to short-term trade policies protecting food security. It focuses on optimal responses of Sub-Saharan Africa and the European Union to policy shocks happening in Ukraine and Russia. Building on mainstream trade theory, it accounts for worldwide trade and consumption patterns to design ad hoc trade policies for short-term resilience. To do so, I design a three-regions, three-goods microfounded model of trade in which food preferences vary across regions. This model illustrates the point that net importing regions are affected by the demand from other parts of the world with similar preferences. In the face of a price shock, the model implies that trade restrictions in a large importing region may benefit consumers in other importing regions, through both price and substitution channels. I then test my results in a general equilibrium model and simulate a shock on wheat and grain exports from Russia and Ukraine in the Global Trade Analysis Project’s model (GTAP). In this setting, Sub Saharan countries are affected by the higher world price and by the demand of European consumers, which competes with demand from domestic African consumers. I show that, in this context, European import tariffs have the potential to improve welfare in Africa’s food importing countries.

Keywords: cascading effects; Sub-Saharan Africa; Food security; trade policy; European Union; regional tastes (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-agr, nep-cis, nep-int and nep-inv
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