In recent years, export bans on staple crops have become more and more common as countries attempt to safeguard their domestic food supplies and protect their populations from international food price spikes. Research has shown, however, that such policies often do more harm than good, reducing the prices that local producers receive for their goods and increasing uncertainty in the market for both farmers and traders.
The authors of a new article published in Development Policy Review examine these effects in the case of Tanzania’s 2012 maize export ban using a computable general equilibrium (CGE) model. The model consists of 58 agricultural and non-agricultural sub-sectors defined for 21 regions. It also disaggegates households by region to allow for analysis of the export ban’s impact on household groupings; households are broken down into rural farm, rural non-farm, and urban households, and then further into five income quintiles (income data taken from the 2007 National Household Budget Survey). According to these quintiles, Tanzania’s poverty headcount in 2012 was 37.6 percent in rural areas and 24.1 percent in urban areas.
Tanzania’s 2012 maize export ban lasted from early in the year until September. Similar to other studies of export ban policies, the results show that Tanzania’s export ban, had it been continued, would have come at the cost of the country’s long-term development goals, while providing only limited short-term benefits for a small portion of the population.
Maize production has increased in Tanzania in recent years due to an expansion in planted area; this increased production has allowed the country to become a net maize exporter. Exports to neighboring Kenya are particularly profitable for Tanzanian farmers, and such cross-border trade has also been shown to help mitigate price volatility in border regions, according to the report’s authors. By removing an important maize marketing channel, the export ban immediately lowered total demand for domestically produced maize, driving maize prices downward. For regions that produced a maize surplus (and thus tended to export more), the model estimated that under the export ban, producer prices would be 18-20 percent lower in 2011 and almost 25 percent lower in 2017 than they would have been without the ban. For non-exporting regions, producer prices also declined, although more modestly at 9 percent in 2011.
For Tanzania as a whole, the study found that the export ban would lower consumer maize prices by 13-16 percent. Country-wide, maize and maize flour account for only 7.4 and 8.5 percent, respectively, of total incomes spent on food. Banning the export of maize would only lower the national food price index by 1.9-2.2 percent. The study also found that the majority of this benefit would go to wealthier urban households. Approximately 50 percent of the maize and maize flour consumed domestically is done so by the richest 20 percent of households studied, so any reduction in maize prices would accrue more to these households than to poorer ones that spend less of their money on maize anyway.
In fact, far from helping poor rural households, the export ban actually ends up harming them. By reducing maize prices, the export ban lowered wages for unskilled labor, which many poor households depend upon to supplement their agricultural income. Even more important is the ban’s impact on returns to farmland; maize-exporting regions are significantly affected by this factor, with returns to land falling by more than 10 percent.
The model also found that the export ban actually increased the national poverty rate. Under a free-export scenario, the national poverty rate would be 26.2 percent in 2017; with the export ban in place, however, that rate would be 26.6 percent. This slight increase is driven by higher poverty rates in rural areas, mainly in maize-surplus regions. The total population of rural poor would increase by more than 210,000 by 2017 under the export ban; the model estimates that two-thirds of this increased number would be located in rural maize-exporting regions. By contrast, the total number of poor urban households would fall by approximately 49,000 during the same period under the export ban, further highlighting that the policy primarily benefits urban regions.
Finally, by reducing the prices that maize producers receive for their crops, the export ban would also reduce incentives to invest in future maize production, thus harming growth in the maize sector over the long term. Under the export ban, annual maize production would fall by 3 percent in Tanzania’s non-exporting regions and by more than 7 percent in exporting regions by 2017.
As a result of the study’s findings, in September 2012 the Tanzanian Prime Minister Mizengo Pinda and President Jakaya Kikwete announced that the maize export ban would be lifted. The study, and the subsequent political response, point to the need for in-depth analysis prior to the enactment of any policy in reaction to international price shifts or domestic production shortfalls.