Trade Restrictions: Helpful or Harmful?
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Trade Restrictions: Helpful or Harmful?

Photo by:   Karen Grigorean, Unsplash
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Sofía Hanna By Sofía Hanna | Journalist and Industry Analyst - Fri, 03/03/2023 - 09:39

War in Ukraine has had severe repercussions on the global economy, which was already strained by the COVID-19 pandemic. To counter some of the impact suffered by supply chains, trade measures were introduced o foodstuffs, fertilizers and energy. However, these measures ended up causing further economic uncertainty within the international trading system, exacerbating food insecurity for many developing and least-developed countries, says the World Trade Organization (WTO).


Ukraine and Russia are major food and agricultural exporters and ranked among the top exporters of wheat, maize, rapeseed, sunflower seed and sunflower oil in 2021. Additionally, Russia is a leading supplier of fertilizers. 


The fear of severe domestic shortages of basic foodstuffs pushed other countries to also introduce import/export restrictions on these products or their close substitutes. For example, on Feb. 13, 2023, the Mexican government issued a new decree on glyphosate and genetically modified (GM) corn, which prohibits its use in products for human consumption, as previously mentioned by MBN. The decree allows the use of GM corn and derivatives for animal feed and industrial manufacturing products like cosmetics, textiles and paper. 


WTO Trade Monitoring data suggest that irrespective of existing export restrictions on food, feed and fertilizers before the outbreak of the war in Ukraine, a noticeable spike occurred after Feb. 24, 2022. Since the beginning of the war and up to Feb. 28, 2023, 96 export restrictions on essential agricultural commodities were identified to have been applied by 29 WTO members. The export restrictions currently in force cover approximately US$85 billion of total world exports. “While the initial implementation of export restrictions was often directly attributed to the war, subsequent measures were introduced concerning the need to ensure domestic supply and to contain inflationary pressures. In a sense, it would appear that the initial direct linkage between the war and the implementation of export restrictions is now less obvious,” states the WTO. 


World food prices peaked in the spring of 2022 and have fallen for ten consecutive months, suggesting that food markets are stabilizing after the initial shock associated with the start of the war in Ukraine. However, at the same time, the food insecurity outlook remains serious and will require continued vigilance. Moreover, the costs of food products have continued to be affected by inflation. 

INEGI reported that in January 2023, inflation reached a 7.9% rate, a rebound from the previous 7.82% reported in December 2022. Analysts expect inflationary pressures on food to diminish during 2023, but tensions in Europe remain a risk factor. “Food prices in other countries have begun to decelerate and the demand component is also expected to slow down soon,” says James Salazar, Deputy Director of Economic Analysis, CIBanco.

Photo by:   Karen Grigorean, Unsplash

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