While there is significant uncertainty and it is difficult to predict whether the initial shock due to Covid-19 will be closer to the baseline or to the upward or downward scenarios, the results raise some concerns. Regardless of the size of the initial impact of Covid-19, escalating trade restrictions would multiply the initial shock on world export supplies and food prices by a factor of 3. On a yearly basis, and assuming that the shock does not persist beyond a quarter, the total decrease in global export supply of food as a result of uncooperative trade policy ranges between 5.2 percent (downward scenario) and 13.8 percent (upward scenario). These figures are similar to the contraction in world export supply in 2008-09, which was around 11 percent. While today several factors contribute to mitigate food price increases (higher buffer stocks for food staples, lower oil price), poverty could rise as a result of the crisis making even small increases in food prices a larger threat to food security.<sup>4</sup> In fact, as the majority of import food dependent countries are developing and least developed economies, the negative effects of Covid-19 and export restrictions on food markets would be primarily felt by the poorest countries. We find that the most affected import food dependent countries include Tajikistan, Azerbaijan, the Arab Republic of Egypt, the Republic of Yemen and Cuba, which would experience increases in average food prices ranging between 15 and 25.9 percent. For cereals, developing and least developed import food dependent countries would see price increases of up to 35.7 percent.

This paper contributes to the growing, just-in-time literature on the economics of Covid-19 (Baldwin and di Mauro, 2020a and 2020b). Methodologically, this paper is close to two recent studies that use estimates of trade elasticities to assess the global price effects of supply disruptions associated to Covid-19 in China (Kee, 2020) and of export restrictions in countries that produce medical products needed to manage Covid-19 (Espitia, Rocha and Ruta 2020a). A study by Laborde, Martin and Vos (2020) uses a Computable General Equilibrium (CGE) model to quantify the effect of Covid-19 on food security via its impact on poverty in developing countries. Our work also relates to the literature on the role of trade policy in the global food crises of the late 2000s (Martin and Anderson, 2012; Giordani, Rocha and Ruta, 2016), which is further discussed in the next section.

The paper is organized as follows. Section 2 presents a simple version of the theory. Data on Chinese exports of food during January and February 2020 and on world trade flows in food markets are presented in Sections 3 and 4, respectively. The quantification of the impact of Covid-19 and export restrictions on the world export supply of food and food prices is presented in Section 5. Section 6 has the sensitivity analysis. Concluding remarks follow.

# **2. The “multiplier effect”**

This section provides a brief review of the theory on the multiplier effect of trade policy (Giordani, Rocha, and Ruta, 2016). The model builds on developments in the literature on behavioral economics and trade policy that modifies an otherwise standard trade policy model to account for loss aversion -the fact that individuals value losses more than gains (Freund and Ozden, 2008; and Tovar, 2009). In this setting, preventing losses may loom large in the government's objective function, leading to radically different predictions from standard political economy models of trade policy (e.g. Grossman and Helpman, 1994).

The key insight of the literature on trade policy under loss aversion is that, in the absence of other tools, a welfare maximizing government may use trade policy (e.g. export taxes or subsidies) when the

> 4 Simulation based on a Computable General Equilibrium (CGE) model finds that 140 million additional people globally could fall into poverty due to Covid-19 (Laborde, Martin and Vos, 2020).

5