Introduction

The conflict in Ukraine has caused a global economic and humanitarian catastrophe that ranges from human suffering, loss of lives, global food price increases, food shortages and food insecurity mainly in poor countries. This war is happening at a time when the world has barely recovered from the impact of the COVID-19 pandemic, which also ravaged the global economy. Food shortages are predominantly affecting countries that are dependent on Ukraine and Russia for imports of key food staples as well as fertilizer. Some members of the World Trade Organisation (WTO) who are major exporters of staple foods and fertilizer have resorted to export restrictions, because of market uncertainties triggered by the war. These WTO members are opposed to an export restrictions outcome that seeks to introduce stringent notification requirements on grounds that they need additional flexibility to respond appropriately in cases of food shortages and volatile prices. The WTO rules allow countries to impose export restrictions as a temporary measure under certain circumstances. Members are imposing more export restrictions; this is evidenced by declining trade in food and essential products.

Stringent export restrictions notifications is one of the priorities for net food importing countries in the WTO agriculture negotiations. Members of the WTO are under pressure to resolve contentious issues, particularly exemption of World Food Programme purchases from export restrictions, and improved notifications by the patrons of export restrictions^[1]. The discussion on export restrictions is a long-standing issue in the WTO agriculture negotiations. This discussion is generally prompted by economic crises, which puts pressure on food security, leading to rising food prices and a surge in the use of export restrictions on food supplies. Increased use of export restrictions was experienced during 2008/2009 food price increases, as well as during the COVID-19 pandemic. More recently the use export restrictions have increased due to the Ukrainian conflict.

The WTO rules allow countries to impose export restrictions as a temporary measure under certain circumstances. There are two contending arguments in the WTO export restrictions discussions. One argument, submitted by the opponents of export restrictions, contends that the general effect of imposing these measures is the reduction of the supplies in the global markets. When export restrictions are imposed by several exporters concurrently, this results in uncertainty and price volatility in world markets.^[2]

Governments that resort to export restrictions contend that they have a responsibility to put the needs of their own citizens first. Thus, during periods of economic uncertainty proponents of export restrictions generally consider domestic demand and consumption. The surplus production can then be exported to the rest of the world. Although this argument is sound, the use of export restrictions leads to shortages of supplies in other parts of the world, leading to scrambling for alternative suppliers and ultimately increasing prices. The supporters of export restrictions argue that this is an essential policy instrument used by developing countries for economic development, food security and economic diversifications.^[3]

Interestingly both the proponents and non-proponents of export restrictions have imposed export restrictions during the COVID-19 pandemic and more recently during the Ukrainian War. Although the WTO members are historically divided on the use of export restrictions, it seems that during periods of economic crises, with severe threats of food shortages members are willing to trade policy positions on export restrictions to accommodate evolving global circumstances. In the WTO this has been displayed through a shift in positions from advocating for free flow of goods and services to supporting and application of more protective measures. In this regard, countries that have propagated against the use of export restrictions (which has been regarded as trade restrictive), have resorted to imposing export restrictions. The above mentioned indicates a shift in policy positions, which strengthens the argument in favour of the use of export restrictions, thus diminishing chances of reaching an outcome at MC12. One of the contentious issues on export restrictions is the proposed prior notification for the imposition of export restrictions. There is a view that prior notification is problematic as export restrictions are imposed during emergencies and thus adherence to prior notification is difficult for many members.

Both Ukraine and Russia are major producers and suppliers of key staple foods and have imposed export restrictions on agricultural supplies. Consequently, the disruptions caused by the war in Ukraine and the sanctions imposed on Russia, has reached global calamity^[4]. Food production and supply chains that were already under pressure from the COVID-19 pandemic are severely strained. Russia and Ukraine export more than a quarter of the world’s wheat.^[5] In addition to wheat, the warring parties are major suppliers of other agricultural and essential commodities. Ukraine is a major supplier of grains such as wheat, spring barley, corn, sunflower and sugar beets. Russia on the other hand is a major producer and exporter of wheat, barley, sunflower seed, oats, potatoes and rye as shown in table 1. Other essential commodities produced and exported by Russia include pig iron, nickel and natural gas, coal, crude oil and fertilizer.^[6]

Table 1: Top 5 exporters of HS10 Cereals: wheat, meslin, rye, barley, oats, maize or corn, rice, grain sorghum, buckwheat, millet, canary seeds and other cereals

Source: ITC Trade Map

Table 1 above shows that both Russia and Ukraine are in the top 5 of the world’s largest exporters of cereals. These two countries combined supply approximately 16% of cereals. Both warring parties have imposed export restrictions and export bans on agricultural products. Ukraine has restricted exports of sunflower oil, wheat and oats in an attempt to protect its war-torn economy. Russia has banned sales of fertilizer, sugar and grains to other nations.

As the conflict in Ukraine continues, the WTO notifications on export restrictions reveal an increase in the number of countries that have imposed export restrictions on food supplies. As an example, the European Union has imposed export restrictions on a number of cereals.^[7] According to the WTO, in March 2022, 12 members-imposed export restrictions on food supplies. These members constitute less than 10 percent of WTO members.^[8] The recently imposed export restrictions is an act of desperation by governments to secure food and other essential commodities for their nations as they are confronted with shortages of supplies and rising prices. The number of export restrictions imposed and notified to the WTO has increased as the war continues, further disrupting agricultural production in these two countries. In addition to the negative impact in the global food prices, export restrictions limit consumer choices and the variety of sellers of commodities, as imported quantities decline. ^[9] This triggered more WTO members to impose export restrictions on substitute goods. Evenett (2022) confirms that since the beginning of 2022, 47 countries have imposed export restrictions on food and fertilizers. 43 of these export restrictions have been imposed since Russia invaded Ukraine in late February.^[10]

How can import dependency be reduced? Although complete self -sufficiency of food supplies by many countries is not possible, the disruptions caused by the war has exposed the interdependence and the vulnerability of the global community. It has also highlighted the urgent need for alternative suppliers or agricultural hubs. Many parts of the world have developed global value chains (GVCs). These GVCs should be able to provide alternative agricultural hubs in different regions. For the African countries, which have lagged behind, the development and harnessing of regional value chains is more urgent.

Export bans of sunflower from Ukraine, the world’s largest producer of sunflower oil (see table 3) has prompted Indonesia, the largest producer of palm oil to impose export restrictions on palm oil. The disruption of the supply of sunflower oil from Ukraine has created a demand of cooking oil from Indonesia, thus causing an increase in prices of cooking oil due to increased demand. Alternative measures such as reserving stock for domestic consumption has not succeeded in curbing domestic prices in Indonesia, thus hurting poor consumers who can no longer afford to buy cooking oil. These measures have added to skyrocketing prices for vegetable oils, driven by a disruption in the supply from Ukraine.

A similar scenario played out at the height of the COVID-19 pandemic; with widespread use of export restrictions on medical supplies as well as food supplies.^[11] This scenario of resorting to export restrictions suggests that both the proponents and non- proponents for export restrictions are keen on using these measures during times of crises, irrespective of policy positions on export restrictions. The fluidity of the WTO members’ positions and support for export restrictions will make it even harder to achieve an outcome at MC12. It remains to be seen how the WTO outcome of export restrictions will be packaged.

Conclusion

As the Russian invasion of Ukraine continues, the ripple effect of this war continues to cause human suffering, damage to the global trade and disruptions to food supplies with devastating consequences for poor countries. The disruptions in global food suppliers has prompted the use of export restrictions as countries are scrambling for alternative supplies of essential commodities. These disruptions have also exposed the dependency of the global community on food supplies produced by a handful of countries. Additionally, a need for alternative supplies and the strengthening of regional value chains and alternative agricultural hubs has been highlighted.

Export restrictions is high on the agenda of the MC12, with key issues of negotiations being on exemption of WFP consignments from export restrictions as well as improved notifications to the WTO by the users of export restrictions.

Improved transparency through timeous notification and information sharing can help the international community manage the catastrophe caused by the war. Sharing information about food supplies and stockpiles can assist to prevent panics and keep markets functioning smoothly.

The increased use of export restrictions by both the proponents and non-proponents of export restrictions suggests that there is a shift in policy positions. Although this shift in policy positions may be triggered during times of crises, it also reveals that an outcome on export restrictions at MC12 maybe more difficult to attain.

^[1] World Trade Organization. (2022) Committee on Agriculture – Special Session Report by Ambassador Gloria Abraham Peralta to the Committee on Agriculture in Special Session, JOB/AG/224, January 2022

^[2] Fung, K. and J. Korine. 2013. Economics of Export Restrictions as Applied to Industrial Raw Materials. OECD Trade Policy Papers, No. 155. OECD Publishing. Paris. Available at: http://dx.doi.org/10.1787/5k46j0r5xvhd-en.

^[3] Vutula, N. 2021. Perspectives on the Current WTO Agriculture Negotiations On Export Restrictions, Working Paper, Trade and Industrial Policy Strategies, February 2021

^[4] https://voxeu.org/article/economic-cost-trade-restrictions-russia

^[5] UNCTAD calculations, based on 2020 data from United Nations Comtrade Database. * Harmonized System codes are 1001 (wheat), 1003, (barley) 1005 (corn), 120510 (colza seeds) and 120600 and 151211 (sunflower seeds and oil) available from  https://unctad.org/system/files/official-document/osginf2022d1_en.pdf

^[6] ibid

^[7] World Trade Organization. (2022) Committee on Agriculture, G/AG/N/EU/77

^[8] https://www.wto.org/english/news_e/news22_e/dgno_28mar22_e.htm

^[9] https://penpoin.com/trade-restriction/

^[10] https://bdnews24.com/world/2022/04/30/governments-tighten-grip-on-global-food-stocks-sending-prices-higher

^[11] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/MA/W168R2.pdf&Open=True