# **1 Introduction**

In developing countries, staple foods frequently account for a significant share of poor households’ budgets. Many poor people have limited possibilities to insure against adverse price shocks. Price spikes are very problematic for poor households that are not self-sufficient, and often jeopardize their capacity to feed themselves. An important response of developing country governments to expressions of this concern is to implement food price stabilization policies. Yet, the study of these policies has been confined mainly to closed economy contexts, with an emphasis on the role of storage (see Wright, 2001, for a survey). From a theoretical standpoint, little is known about the role of trade policy in price stabilization programs, despite their widespread use. Recourse to trade policy to counter price volatility has been common in most Asian countries where stabilizing the domestic price of rice is a central objective (Timmer, 1989, Islam and Thomas, 1996, Dorosh, 2008), and also in Middle East and African countries in the case of wheat and to a lesser extent maize as well as rice (Dorosh, 2009, Wright and Cafiero, 2011). The question is probably less acute in Latin America, where most countries are net exporters of grains, but it is not irrelevant, as witnessed by the use by Chile of a price-band system for wheat and a few other food products (Bagwell and Sykes, 2004). More generally, based on a large-scale database on agricultural price distortions, Anderson and Nelgen (2012) show that countries tend to vary their nominal rate of assistance to agriculture so as to limit the effects of variations in world prices on domestic prices.

Trade and trade policies are key aspects that need to be taken into account in considerations of food security and price stabilization in developing countries. They raise numerous questions, the most important perhaps being: How should storage and trade policies be combined to achieve price stabilization? Increased reliance on national buffer stocks is frequently suggested as a remedy for developing countries faced with significant volatility in world prices. But is this a consistent policy _per se_ , independent of trade policy interventions? Dorosh (2008) suggests that greater reliance on the world market allowed much more cost-effective price stabilization in Bangladesh than in India; the latter relied almost exclusively on huge public stocks and severe restrictions on imports. Can it be taken for granted that greater trade openness, or more reactive trade policy, would reduce the amounts of stocks needed to achieve a given stabilization target, and to what extent?

Export restrictions raise a number of additional questions. Most analysts of the 2007–08 food crisis agree that trade policies played a significant role in fueling international price spikes (von Braun, 2008, Mitra and Josling, 2009, Headey, 2011). In particular, export bans enforced by several rice exporters seem to have contributed greatly to the astonishing price levels reached (Slayton, 2009). Noting the similar situation in the 1973–74 crisis, Martin and Anderson (2012) emphasize the collective action problem created by export restrictions: their use by some countries to provide shelter from price spikes aggravates the problem for others (see also Bouët and Laborde Debucquet, forthcoming). The restrictions imposed by Russia on its cereal exports following a drought in 2010 can only add to this concern. A first step towards coping with this problem is to achieve a better understanding of the motivations and consequences of export restrictions. Based on Marshallian surplus analysis, 2