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crisis, and it has largely broken down due to rising prices and new just-in-time inventory methods. Nevertheless it is not clear that pushing for more formal reserve arrangements among major producers is the right way to proceed. Reserves are costly—especially in mostly humid developing countries—and generally incompatible with the incentives of private agricultural producers in developed countries.


Another option might be to use virtual reserves to smooth out futures prices (Robles, Torero, and von Braun 2009; von Braun and Torero 2009). Although innovative, more research is needed to prove causal linkages between futures prices and spot prices. Other policies might also help to ensure short-run access to international food imports. These include the World Bank’s US$1.2 billion rapid financing facility, the Global Food Response Program, or a proposed international grain reserve managed by the WFP (von Braun and Torero 2009).4 In the wake of the 1972–74 crisis, a wave of research tried to assess all of these ideas, but so far such research has not been triggered by the recent crisis. An alternative instrument for reducing price volatility in international markets is to promote freer trade in agricultural commodities. This idea is consistent with our assessment: export restrictions played a dominant role in turning a critical situation into a full-blown crisis, especially in the case of rice. Moreover, analyses conducted after the 1972–74 crisis also demonstrated that free-trade regimes were a potentially viable alternative to large interna- tional grain reserves (see Walker and Sharples 1976; Johnson 1981; Reutlinger and Bigman 1981),5 although more recent research has not yet revisited this question. Another practical issue is how to obtain a more liberal but also more secure international trade regime for agriculture. In the current crisis inter- national markets failed because WTO statutes did not prevent countries from imposing export restrictions that induced so much unnecessary volatility. It has also been recognized that reforms proposed in the July 2008 Framework Agreement did not include provisions to discipline export taxes or bans, nor would special safeguard mechanisms in the agreement have approximated a free-trade arrangement (Abbott 2009). New arrangements need to take into


4 The international grain-reserve proposal in question involves a modest emergency reserve of about 300,000–500,000 tons of basic grains—about 5 percent of the current food aid of 6.7 million wheat-equivalent tons—that would be supplied by the main grain-producing countries and funded by a group of countries participating in the scheme (the G8+5 plus some other major grain-exporting countries). This decentralized reserve would be located at strategic points near or in major devel- oping-country regions, using existing national storage facilities. A range of measures would ensure


financial sustainability of the reserve. See von Braun and Torero (2009) for details. 5 Much of the debate on trade liberalization has focused on its growth and poverty impacts, although the size of these costs is disputed (see the comprehensive review by Bouët 2008). Here we point out that trade liberalization also has an impact on food security.


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