China’s restrictions and tariffs on two major commodities – fertilizer and pork – have caused prices to soar around the world.
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Russia is guilty of food security crisis And Energy price hike With its war with Ukraine, but China — under the radar — has also taken action in three areas that are exacerbating inflation around the world, according to the Peterson Institute for International Economics.
“The Russian war in Ukraine took a heavy toll on the region,” PIIE analysts Chad Bown and Yellen Wang wrote. He added, “It has also contributed to the global food crisis, with Russia blocking exports of vital fertilizers that farmers need elsewhere, and Ukraine’s role as the breadbasket of Africa and the Middle East being destroyed.”
“But there is another, underappreciated risk to global food security,” they wrote in a note last week.
Analysts pointed to China’s restrictions and tariffs on two major commodities – fertilizer and pork.
China’s restrictions extend beyond food. The Washington-based think tank noted that the Asian giant, one of the world’s largest steel producers, also imposed restrictions on the material.
All of these moves have driven up prices elsewhere, even as they have benefited the Chinese people, according to the report.
Analysts wrote that “the problem with China is that it continues to act like a small country. Its policies often have the desired effect at home – for example, reducing the costs of inputs to industry or one group of Chinese farmers or by increasing returns to another.” .
“But they can also be a beggar for your neighbour, as China chooses the policy that solves a domestic problem by passing its cost to people elsewhere,” they added.
Fertilizer prices in China and around the world It started to rise last year, as a result of strong demand and rising energy prices, but since then Pushed to the top after the Russo-Ukrainian war.
Last July, the authorities Major Chinese companies ordered to stop exporting fertilizer The PIIE referred to “ensure the supply of the domestic chemical fertilizer market.” By October, as prices continued to rise, authorities began imposing additional export controls.
Restrictions have continued this year, and are still It will last until the end of summer at leastReuters reported.
“This combination of non-tariff barriers has sharply reduced China’s fertilizer exports. With production continuing to increase at home, Chinese fertilizer prices have stabilized and have since begun to decline,” the analysts wrote.
This is in stark contrast to the situation around the world, the think tank said, where fertilizer prices have continued to rise more than double the levels seen a year ago.
China’s share of global fertilizer exports was 24% for phosphate, 13% for nitrogen and 2% for potash — before the restrictions, according to the PIIE.
PIIE analysts said China’s decision to withdraw fertilizer supplies from world markets only “pushes the problem on others”.
They added that when there is less fertilizer, less food is grown, this “cannot happen at the worst of times” given that the Russo-Ukrainian war is already threatening the global food supply. Russia and Ukraine are major exporters of crops such as wheat, barley, corn and sunflower oil.
“At such a critical moment, China needs to do more – not less – to help overcome the potential humanitarian challenge that may arise in many poor and food-importing countries,” the report said.
In order to bring down high prices domestically, the authorities last year lifted a ban on imports of steel scrap. They also implemented a few rounds of export restrictions, and increased export taxes on five steel products.
By March of this year, steel prices in China were 5% lower than they were before the restrictions.
“But as in the case of fertilizers, these declines have come at the expense of the rest of the world, with prices outside China still higher,” PIIE analysts said. “The concern is the widening of the wedge between global and Chinese steel prices that has emerged since January 2021.”
Story of the Global pork prices rise It began in 2018, when China – which once produced half the world’s pork supply – saw pigs hit by a major outbreak of African swine fever.
This forced the country to slaughter 40% of its herd, i.e. caused pork prices to more than double by late 2019. Global prices followed suit, jumping 25% as China imported more pork and pulled supplies from markets, according to PIIE.
“China reduced price pressure at home beginning in 2019 by tapping into imports before its recent shutdown. These policies affected the rest of the world,” PIIE analysts wrote.
The think tank said Beijing also lowered tariffs on pork imports in 2020, likely causing consumers elsewhere to suffer price hikes as a result of reduced supply.
However, authorities raised those fees again this year as the swine fever problem receded.
“A potential unintended benefit would be reaped if, in the current environment of rising global meat prices, Chinese tariffs unexpectedly liberalized global supplies and helped relieve pressure on pork prices facing consumers outside China,” the report said.
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