Coronavirus and Trade Restrictions and The Green Technology

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Question 4: a. In the podcast Trade Talks episode “Coronavirus and Trade Restrictions,” Nadia Rocha explains her research on food crises during 2008-2011. She argues that one possible reason for the food price spike is the multiplier effect of the export policy. Briefly describe this multiplier effect.

Coronavirus Disease presents a cascade of consequences that permeate through the majority of sectors worldwide. One of the areas that this pandemic has restricted includes international trade, where the markets for goods have shrunk, and prices of goods, including food, remain uncertain. The Corona Virus Disease has magnified the food changes that are occasioned by export policies. International food prices have become an issue of international concern over the recent past.

A fundamental economic theory regarding international trade states that in a world with the increased international flow of goods, countries will enjoy profitability when they specialize in producing goods or services that they own comparative advantage of production (New York Times). The Coronavirus pandemic disrupts this free moment of goods across the globe. This implication could mean that countries with a comparative advantage over the production of given goods like food may not be able to export due to travel and mobility restrictions, leading to either very low or very high food prices in some regions.

There was a food crisis that was witnessed between 2008 and 2011. This food crisis could have been occasioned by diverse factors, including reducing food stocks, increasing demand in emerging economies, changes in monetary policies, and financial speculation (Giordani et al., 2012). Besides, several observers blamed trade policy as a critical factor that underpinned escalating food prices. Export policy in the form of export restrictions directly aggravates food crises. There is a correlation between export policy and food prices. When individuals become loss averse, food exporter tends to deploy trade policy to protect the domestic economy from price shocks of a large magnitude. This situation creates complementarity between the food prices in international markets and export policies where unilateral action by exporting counties results in a multiplier effect.

When a shock within the international food market drives up or down its price, governments react by imposing export restrictions or introducing subsidi...