Implications of export constraints on domestic markets

Imposing regulations on agriculture export have been rising until very recent times. When there was a substantial increase in food prices, a few nations made use of these restrictions in order to ensure adequate domestic food supply flow thereby improving market efficiency. However, there are arguments that such a step has resulted in lesser correlations between producers and end consumers and some theories state that price volatility would have in turn increased than otherwise.

Understanding the situation

While nations are striving towards trade liberalization through providing an open trade market with minimal import regulations, the arising concern is regarding the increasing level of export bans levied by a nation in the global market. Countries lay down restrictions stating reasons such as controlling global price instability and protecting domestic food security. It is an interesting fact that the past decade has witnessed approximately 32 nations imposing export bans on various agricultural produce. Studies explain that these regulations further elevated the prices of grains as rice and wheat by almost 35%. Cases also prove that while the global export bans have effects on domestic market prices, they cause subsidiary aftermaths as local market price volatility as well as the international food market is unable to alleviate the existing inefficiencies in the market as supply shortage etc. These restrictions are capable of disintegrating the domestic market in the absence of opportunities for open trade.

The road ahead

In order to benefit domestic traders form international markets, trade centers need to be more liberalized and open to external sources as well be spatially integrated, meaning crop prices are decided across areas, and huge cost transmission thereby activating product movement between points. Without spatial integration, information regarding pricing can be misinterpreted that might lead to inefficiency in the product movement process.

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