should be relied on to compensate for supply shortfalls (World Bank 2006).<sup>4</sup> The food crisis has led many researchers and experts to question the dominant approach (Timmer 2012; Galtier 2009; Abbott 2012a; HLPE 2011; Oxfam 2011). The dominant approach has attracted criticism because safety nets have proved complex to use in times of crisis, market-based risk management instruments have not yet been successfully developed, and the countries that were relying on the world market for their imports were the ones that suffered the most during the crisis. Indeed the countries that weathered the food crisis best were those countries with very interventionist policies related to both trade and storage, such as China and India. Despite international recommendations, stabilization policies are widespread in most developing and emerging countries. For example, Demeke, Pangrazio, and Maetz (2009), based on information obtained from 81 countries, show that 68 of them used trade policy measures during the 2007/08 food crisis, and 35 released public stocks at subsidized prices.

The present paper attempts to make sense of this divide between policy advice and practice. Drawing on the theoretical literature and on accounts of policy responses to price volatility, this paper tries to answer the following questions: What are the justifications for domestic stabilization policies? Following the food crisis, is the policy framework put forward by international organizations still relevant, or should countries rely more on price-stabilization policies? And if so, what type of price stabilization?

The liberal paradigm is facing reasonable criticism. Why should food importing countries trust a world market that is susceptible to sudden spikes and can even disappear if major exporters close their borders? In our view, the weakness of the dominant approach to a large extent is related to the fact that it requires countries to trust each other and to adopt the same cooperative policies. Indeed, the impact of domestic policies on stability of world prices is negative in the case of countercyclical trade measures and potentially positive in the case of storage policies. Those policies also are interdependent in the sense that the each country’s domestic policy choices might affect the policy choices of its trade partners. Because domestic stabilization policies can be rationalized as the outcome of a non-cooperative equilibrium in which countries coordinate through a vicious circle of negative feedbacks, their reform faces considerable challenges.

Coordination on a non-cooperative equilibrium and distrust among agents are not just international problems; they apply also to the domestic sphere, where in many countries public intervention crowds out private agents because of political uncertainty, and regulations limiting profit from arbitrage (Wright and Williams 1982a; Tschirley and Jayne 2010). The caution of private agents confirms government’s belief that it must step in to ensure basic storage and trade, deterring even more a normal market behavior. This mechanism implies that any

> 4 A framework labeled "best practice" by Timmer (2010) and Abbott (2012a), and "optimum strategy" by Galtier (2009).

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