Minimum export price
If a minimum export price is set for a particular product, it may not be exported below this price. Variable export taxes that are based on world market prices are also sometimes referred to as minimum export prices.
The General Agreement on Tariffs and Trade (GATT 1947) Article XI prohibits all forms of export restrictions except export taxes. Export restrictions imposed temporarily in order to meet critical shortages in foods or other essential products are another exception. However, expressions such as ‘temporary’, ‘critical’, and ‘shortage’ are not specifically defined. Therefore, minimum export prices on agricultural products are permissible provided their use can be justified to the WTO.
Conventional minimum export prices have no significant impact in the context of development policy. They are useful for selecting between exportables and non-exportables in the same product group, so their relevance is practical rather than impacting on development policy.
- A properly functioning country-wide administration and monitoring system with access to the relevant information and sufficient technical and human capacities for its design, implementation and monitoring
- Clear and coherent political strategy and targets for policy-makers and public authorities
- Close cooperation and knowledge sharing with research institutions
- Compatible regional and world trade law (WTO conformity)
- Constant market surveying and forecasting
- Efficient customs administration
- Market price information systems
Possible Negative Effects
- Market distortion
- Minimum export prices have to be constantly adapted to fluctuating world market prices and therefore entail significant administrative effort (exception: variable export taxes)
- They must also be pitched correctly: if they are too low they have no effect, but if they are too high they amount to an export ban
- Loss of income for domestic farmers and exporters due to lower domestic prices and fewer exports
- Sales markets and trading partners may be lost and could be difficult to win back in the future
- Production in the sector of the product concerned drops due to lower prices, endangering food and nutrition security in the medium and long term