Asia's Role in Stabilizing Food and Agricultural Prices

Every decade or so, food becomes newsworthy globally because of a price spike, either upwards (hurting consumers, as in 1973 and 2008) or downwards (hurting farmers in open economies, as in 1986). Most such price spikes are a consequence of major policy shifts, since local weather-induced supply shocks in a multi-country trading world tend to offset each other. Fluctuations in international food prices are exacerbated by trade restrictions that vary with those prices, and are worst for the most-insulated markets such as rice. Asian rice policies thus contribute to world food price instability. More broadly, however, the gradual reduction in anti-agricultural and anti-trade policies in many Asian emerging economies in the past quarter-century has contributed very substantially to global economic development and poverty alleviation. After examining how large the fluctuations in real international prices for food are relative to those for other primary products, this paper examines the extent of opening up of agricultural markets in Asia relative to other developing economies. It then examines what could be done by governments in Asia and elsewhere to achieve more efficient and equitable outcomes for food markets in the future that are both growth enhancing and poverty alleviating.