The wave of food protectionism in Asia

Ban of India, Malaysia

Food prices Rising global prices have prompted some Asian countries to halt exports of some products to protect domestic consumers, raising concerns about higher inflation.

Effective from 1.6, India only allows local businesses to export sugar with special permission from the government. The measure is implemented to “maintain domestic availability and stabilize sugar prices” and will be in effect until October 31 or until further notice, the Indian government announced on May 24.

In 2020, India is the world’s second largest sugarcane producer after Brazil and the world’s largest exporter of refined sugar in the same year, according to the Food and Agriculture Organization of the United Nations (FAO).

The sugar export ban was introduced by India after it announced in mid-May that it would ban wheat exports. India is the second largest wheat producer in the world. Indian authorities are working to ensure Food Security in the country as hot weather raises concerns about crop yields.

Similarly, from 1.6, Malaysia started to restrict chicken exports to solve the shortage of domestic supply and stabilize prices. Malaysia’s export ban includes whole live poultry, chilled and frozen meat, chicken parts and chicken products, according to a statement from the Ministry of Agriculture and Food Industry. Malaysia has not yet announced when to resume exports.

The move by India and Malaysia comes at a time of rapid global food inflation. The FAO’s benchmark food price index, which includes meat, dairy, grains, vegetable oils and sugar, was at 158.5 in April, up 30% from a year earlier. The increase in the food price index is largely attributed to supply and logistics disruptions due to the war Ukraine and the COVID-19 pandemic.

Indonesia also announced to stop exporting palm oil in April, although the ban was lifted in May.

Increasing pressure on food prices

“Overall, I would say the export ban adds more pressure on food prices,” Priyanka Kishore, an economist at Oxford Economics, told Nikkei.

This can be seen clearly in the relationship between Malaysia and Singapore. Singapore depends on its neighbor for a third of its chicken imports. Consumers in Singapore rushed to buy fresh chicken at markets after Malaysia’s announcement a few days ago.

For developing countries and low-income households, the upward trend in food prices is particularly worrisome. “Food scarcity or unaffordable prices, especially in poor countries, will cause inflation to rise and cause social unrest much faster than oil prices. We’re likely to see more food nationalism this year,” warned Jeffrey Halley, senior market analyst at Oanda.

Right before the war between Russia and Ukraine – two major grain suppliers – food nationalism has heated up amid the COVID-19 crisis. The COVID-19 crisis has triggered protectionism not only for food but also for other essential commodities.

Akio Shibata, president of the Natural Resources Research Institute in Japan, said that, like many other fields, the food supply chain was previously globalized after the World Trade Organization (WTO). was born in the 1990s. The basic model is to produce food in low-cost countries and transport it cheaply to consuming countries.

However, this trend has been reversed in recent years due to a variety of factors, including increased consumption in emerging economies such as China, climate change and recent disruptions. All of these factors drive up prices.

As prices rise, countries change positions to favor domestic protection, domestic supply, and export if there is a surplus. Going forward, Shibata warned, as long as prices continue to rise, protectionist measures are likely to spread to many other countries and foods.