exports for China, we also assume an additional 5 percent decrease in supply across the board to account for factors such as the negative impact of Covid-19 in trade logistics and border management. Given the substantial uncertainty surrounding the current health crisis, the next section analyzes additional scenarios where the initial shock associated to Covid-19 is smaller and larger than for China.

Under this set of assumptions, results on the initial decrease in global export supply due to Covid-19 are presented in Table 3. Covid-19 is estimated to lower the world’s export supply of food by 12.7 percent, on average. The negative impact ranges between 2.4 percent for cocoa beans to 23.6 percent for rice. Many important staple foods, including most cereals such as barley, oats, rye and wheat and meslin and other products such as eggs, poultry, swine meat and potatoes are estimated to have sizeable drops in export supply of over 15 percent. These estimated effects should be considered as initial impacts, as the longer-term effects of Covid-19 on the export supply of food will largely depend on how long it will take the health crisis to be contained -something that it is difficult to predict at this stage. With this caveat in mind, we next study the impact of changes in export supply on food prices under different trade policy scenarios.

To calculate the impact of an initial shock in export supply on international prices, the percentage change in the export supply of each food product-country is divided by the import elasticity of that product.<sup>15</sup> Elasticities at the HS 4-digit product level are estimated for a panel covering 152 importing countries by Fontagné, Guimbar and Orefice (2019) and are assumed to be constant.<sup>16</sup> Price changes for individual country-products will depend on the concentration of their imports from the top-50 countries most affected by Covid-19 and on the demand elasticities. Aggregate results on the impact on prices of an initial decrease in export supply due to Covid-19 are presented in Table 3 (column 4). On average, food prices rise by 4.0 percent. Increases in prices for different food categories range between 1.2 for stimulant and oil-bearing crops to 15.1 for fish. Within food categories, cereals such as oats and wheat and meslin experience increase in prices of 11.4 percent and 7.5 percent. Prices of other key staples such as fish fillets and other fish meat, vegetables, potatoes and poultry increase respectively by 33.8, 9.0, 5.9 and 5.1 percent.

In a second scenario, we assume that exporters may use trade policy to respond to this initial shock in an attempt to mitigate domestic food prices as global prices rise as described in Section 2. Specifically, to illustrate a propagation mechanism, we assume that food exporters restrict their export supply by an amount that is equivalent to the total decreases in imports from countries where supply was disrupted by Covid-19. Results illustrating the impact of export restrictions on world supply and prices are presented in columns 2 and 5 of Table 3 respectively. Average export supply decreases roughly 50 percent compared to the initial shock. Price increases are highest for key staples such as fish fillets and other fish meat (59.9 percent), oats (18.3 percent), vegetables (16.1 percent) and wheat and meslin (15.8 percent).

Last, a third scenario is considered where exporting countries impose further restrictions in retaliation to the actions taken by their trade partners. As described in Section 2, as food prices increase due to the first set of restrictions, exporters could further use trade policy to insulate domestic markets from the policies imposed by others -the multiplier effect. In this third scenario, global export supply decreases by 40.1 percent on average across all food products. Global food prices increase by 12.9 percent on average as a result of retaliation. Within cereals, oats experience the highest price increase equivalent to 31.1

> 15 The formula used to compute the changes in prices is: d i =<sup>∆QQppccddIIppIIQQ</sup> �E , where i is the ii importer and k is the product. 16 The next section provides a sensitivity analysis based on estimates of import demand elasticities from Kee and Nicita (2020). DDppIId II PPIIppd dde II ccI ppddppIIQQii

> 16 The next section provides a sensitivity analysis based on estimates of import demand elasticities from Kee and Nicita (2020).

12