Starve thy neighbour?

The wave of political unrest sweeping through the developing world -- a farmers' strike in Argentina, bread riots in Egypt, the toppling of a Prime Minister in Haiti -- has its roots in the soaring price of food.

Economists agree that the best way to lower domestic food prices is to cut tariffs on imports.  Several countries, both developed and developing, have slashed their long-standing tariffs on cereals and grains in recent months.  The scale of the tariff cuts have even led to claims that the higher food prices could breathe life into the World Trade Organisation's Doha Round of trade negotiations, which have stalled for years over the issue of agricultural protection.

Yet cutting tariffs is anathema for some governments.  The loss of tariff revenue from food imports necessitates cutbacks elsewhere.   Faced with budgetary constraints, a number of governments have opted instead to tax food exports.  

• In Argentina, the government hoped to cash in on its farmers' windfall revenues by raising tariffs on soybean exports.  The policy backfired spectacularly.   In protest, the agricultural sector conducted a three-week strike that emptied supermarket shelves. Thousands of Argentines also took to the streets in solidarity with the farmers.
• Last September, India chose to ban the export of all rice except high quality basmati varieties.  The move, which severely restricted world supplies, has been followed by similar restrictions in Cambodia, Indonesia and Egypt.

These policies are highly dubious.  Cutting back on exports impedes a country's ability to finance its imports.  In the long term, it will also discourage domestic farmers from producing food.

Higher food prices are here to stay.  While the slashing of import tariffs may provide short-term relief, maintaining open markets would greatly ease the pressure on developing countries.