Trade Responses to Covid-19 Food Security Concerns in Bangladesh

The Covid-19 health crisis can lead to a food security crisis in Bangladesh if proper measures are not put in place. This global pandemic may cause breaks in food supply chains, food shortages and food price spikes in Bangladesh and a broader range of countries. As widespread lockdowns cause the global economy to slow or fall into recession, the risk of exacerbating extreme poverty and hunger is high (WFP, 2020).


Additional impacts of prolonged border closures on food security are expected in the medium term.
Recent experiences with major outbreaks such as Ebola, SARS, and MERS can shed some light on the direct and indirect negative impacts of interrupted transport and connectivity on food security. During the Ebola crisis in West Africa, closed borders contributed to a significant drop in economic activity in outbreak countries such as Liberia, Sierra Leone, and Guinea. The closed land borders have effectively shut down all land trade, both formal and informal. The lack of mobility and trade, the flight to urban areas by many farmers, failed crops and a lack of available inputs have hit the agriculture sector hard. In Guinea, for example, rice production is estimated to have fallen by 20 per cent in 2014, coffee by half, cocoa by a third, and corn by a quarter (World Bank, 2015).
While trade policy responses have been so far largely muted, there are worrisome developments regarding potential trade restrictions that risk creating a food price spike despite sufficient global food supplies. Trade restrictions can further increase food insecurity risks. Import tariffs can limit the availability of essential food supplies, while export restrictions further raise the level and the volatility of food staples. Recently, several governments have started to launch export restrictions on food products. For example, Russia is planning to limit grain exports to 7 million tons from April through June, while Vietnam has temporarily suspended rice exports, and Indian rice traders have stopped signing new export contracts due to labor shortages and logistics disruptions (Reuters, April 3, 2020).
Recent export restrictions and stockpiling of food have started to contribute to increases in grain prices. For instance, wheat traded on the futures market in Chicago has risen by 10 per cent between mid-March and beginning of April, reaching USD 5.50 a bushel, while physical prices for French wheat have increased by 11 per cent. Benchmark Vietnamese rice prices have increased by 14 per cent to USD 410 a ton since the start of 2019 (Financial Times, Countries follow consumers in stockpiling food, April 4, 2020). This is consistent the commodity price spikes observed during the 2006-2008 severe droughts that were generated by several governments' restrictions on shipments of food abroad (Global Trade Alert, 2020).
Trade restrictions can affect import-dependent essential food products such as wheat, sugar and edible oils in Bangladesh. While Bangladesh is self-sufficient in rice production, the country is largely dependent on imports of other essential items such as wheat and sugar (table 1). In addition, around 90-92 percent of demand for edible oil is met through import 5 . In FY19, the top 5 food import items in terms of import value consisted of wheat, sugar, and edible oil products (table 2), covering over 58.2 percent total food imports. https://thefinancialexpress.com.bd/views/analysis/rising-trend-in-consumption-of-oils-and-fats-in-bangladesh-1582381921 Although Bangladesh's current public grain stock seems adequate, recent reports point to increasing food shortages. At almost 1.7 million MT, the public food grain stock (rice and wheat combined) was 13.5 percent higher as of March 23, 2020 than the grain stock registered over the same period in the previous fiscal year. The government imported 5.18 million MT of food grains (out of which 0.04 million MT was rice), while another 0.5 million MT of wheat is at the port expecting unloading and clearing customs (as of March 23, 2020). However, the pandemic-related shutdown and the shortage of labor are already impacting the March-April harvest of Boro rice, the largest rice crop production in Bangladesh 6 . This is expected to negatively impact the government's procurement target of 1.15 million MT of Boro rice and 0.6 million MT of unhusked rice during the harvesting season. Furthermore, reports of food shortages are beginning to emerge. For instance, on April 7, 2020, the Trading Corporation of Bangladesh (TCB) began selling subsidized essential food items in Dhaka but was unable to meet demand 7 .

Trade Responses to Address Covid-19 Food Security Concerns in Bangladesh
Trade policies can be an essential instrument in the management of food crises. Bangladesh can put in place a set of trade responses to maintain access to and reduce the cost of essential food products. Broad guidance on key trade responses such as eliminating tariffs, refraining from imposing export restrictions, reducing the tax and administrative burdens on all importers and exports, and facilitating trade flows is provided in recent World Bank Trade Guidance Notes such as World Bank (2020b)  Trade facilitation measures can alleviate the crisis by expediting the movement, release, and clearance of essential food products. Recent measures implemented by the National Board of Revenue to expand customs assessment at ports to reduce congestion and waive storage fees for containers during the national shutdown can be complemented with additional interventions to sustain and enhance the efficiency of logistics. For instance, support to the Government of Bangladesh with the implementation of a National Single Window to automate and integrate all key processes and procedures associated with the application, submission, processing, payment and clearance of trade related permits, licenses, certificates and declarations could be streamlined. Although Bangladesh has phased out mandatory pre-shipment inspections (PSIs), it could eliminate all voluntary PSIs for essential food products. A focus on automation and electronic procedures can facilitate the distancing between traders and border officials in addition to improving logistics efficiency.
Bangladesh can remove import tariffs and taxes on key food products to increase the availability of essential food products. To provide guidance for a possible removal of import tariffs and taxes, Table 4 summarizes the import revenues collected on food products. It shows that lowering prices for staple foods such as cereals, sugar, meats and nuts can be done at a relatively reduced fiscal cost. More details on the various taxes and collected revenue for selected staple foods are presented in the Annex Table. A complementary policy response could lower the interest rate on import loans for essential commodities (i.e. edible oil, sugar etc.). The Bangladesh Bank lowered the interest rate on import loans to 9 percent for nine commodities in early March (one month before the scheduled date to lower the interest rate on lending). The interest rate on import loans for these commodities could be lowered even further to promote imports and increase availability of essential food products. Source: World Bank staff calculations using data from Bangladesh Customs.
Bangladesh can work with neighboring countries on a cooperative trade initiative to refrain from imposing trade restrictions including export bans or taxes on critical food staples. As part of the recently launched SAARC emergency initiative for Covid-19 8 , Bangladesh can lead a regionally coordinated response to avoid export restrictions to reduce the cost and improve the availability of key food products in the region. In general, export restrictions will only exacerbate the current situation. If export restrictions must be used, then they should be targeted, proportionate, transparent, and temporary. Furthermore, Bangladesh can work with Southeast Asian neighbors such as Malaysia and Indonesia (the main source countries for Bangladesh's imports of edible oil and palm oil) to eliminate existing trade restrictions and avoid lengthy and costly requirements related to trade licenses and permits. Annex