The past year has seen a dramatic rise in international grain prices and a fall in world grain stocks to near-record low levels. Together with projections by the Worldwatch Institute of massive grain imports by China in the next century, these developments raise again the perennial question of whether the world will be able to feed itself in the future.

A particularly critical issue is whether the rapid industrialization of densely populated East Asia will lead to hunger in poorer countries? China alone, with 22% of the world's population but only 7% of its land area, is expected to need to import half of its grain requirements by 2030. That would represent a doubling of current world grain trade. And what if India's economic reforms were to have similar consequences?

Such questions are not unlike those that concerned Thomas Malthus and, more recently, the Club of Rome. Malthusians make good headlines, but they continue to be proved spectacularly wrong. The clearest indicators of that at present are the overall availability of food and its relative price in international markets. Today's 5.7 billion people have 18% more food per person than the 3 billion people alive three decades ago. And if the global demand for food had grown faster than supplies, real food prices would have risen over time: in fact they have fallen slightly.

According to the The World Bank, the price of food relative to industrial products has fallen by an average of 0.5% a year since 1900. The Bank expects the same rate of decline over the next ten years as food supply growth continues to outstrip demand. But such projections incorporate many assumptions about future developments in the world economy: what happens under plausible alternative scenarios? That is the question addressed in a recent CEPR Discussion Paper by Kym Anderson, Betina Dimarana, Thomas Hertel and Will Martin.

These researchers construct a model of the world economy for the next dcade and test what might happen under various scenarios to 2005. In their base scenario, the Uruguay Round is not fully implemented: this leads to a continuation of the slight decline in world food prices.

In the study's first alternative scenario, the Uruguay Round is fully implemented by 2005 as scheduled. Contrary to some earlier studies and the fears of many food-importing developing countries, the simulations suggest that this will have almost no impact on real international food prices. They are projected to be only 2-4% higher, an imperceptible rise compared with the usual year-to-year fluctuations in food prices and foreign exchange rates.

There are two reasons for this small effect. First, the agricultural commitments in the Uruguay Round by the most farm-protectionist countries are far more modest than was originally expected. Second, many markets for non-farm products will also be liberalized under the Uruguay Round. As a result, their prices too will rise in international markets, moderating the increase in farm relative to non-farm prices. Clearly, it is relative prices that are important.

This scenario assumes China, and hence Taiwan, remain outside the WTO. What difference would their accession make? A lot, according to the simulations and supposing the following con fulfilled: China opens up to to the extent of its 1995 offer to WT0 members (which was rejected as insufficient at the time); Taiwan cut its industrial tariffs by 36% and its support for farm products by half that amount; and the industrialized countries offer China and Taiwan the same access to textile and clothing markets as if China had been a GATT member in 1994. 

Under these assumptions, China's WTO accession adds very considerably to the Uruguay Round results: international grain price rises would be twice as large, and livestock product prices would be 40% higher; China would import 4% instead of just 1% of its grain needs by 2005; aggregate world trade would be 13% instead of just 10% greater; and the gain in global welfare would be boosted by almost a third as much again.

What is more, these results ignore important dynamic effects of reform, notably the inducement to domestic and foreign investments that would accompany trade liberalization. Should those investments boost China's industrial productivity so that its economy grows 25% faster, the gains from Chinese accession could be as much as four times greater. At the same time, China's independence on grain imports would increase by about twice as much.

There is, of course, a risk that the industrialized countries will not deliver all their promised reforms to textile and clothing markets. That risk will be considerably larger if and when China joins the WTO, given China's huge potential to expand its textile and clothing exports. Should there be such backsliding, a great deal of the projected gains from the Uruguay Round and China's accession would evaporate, Asian industrialization would slow, and the growth in their demand for food imports (and hence the rise in world food prices) would be less.

While net food exporters such as North America and Australasia would be harmed by such a slowdown in Asia's food import demand, might it not be welcome news for poorer food-importing countries in Africa and elsewhere? Anderson and his colleagues think not. They argue that the dampening of world food prices would be a symptom of slower reform and hence a slower growing world economy. That would inhibit development everywhere, including in Africa.

Contrast this with the key reason for the downward trend in world food prices of past decades: the very rapid growth in farm productivity. According to these researchers that productivity growth has been due in large part to well-targeted investments in international agricultural research by aid agencies, the economic returns from which have been, and continue to be, extremely high.

The very success of those research investments, however, has bred complacency. One consequence is that the emphasis on agriculture by aid agencies has waned considerably in the past decade. should that cause global grain productivity growth to slow by, say, one-fifth during the next decade, Anderson and his colleagues predict potentially dramatic effects: by 2005, international grain prices would be more than 5% higher, and global economic welfare wouId be $28 billion less per year. 

These results suggest that in the wake of the United Nations Food and Agricultural Organization's recent summit in Rome, world leaders ought not to worry about the effects of Asia's rapid industrialization on food markets. Instead, they should focus on the need for revitalizing investment in agricultural research in developing countries. That may be the single best way of simultaneously reducing malnutrition and providing new technologies for sustainable development.

This article reviews research reported in 'Asia-Pacificic Food Markets and Trade in 2005: A Global Economy-wide Perspective', CEPR Discussion Paper No. 1474 (September 1996), by Kym Anderson, Betina Dimarana, Tomas Hertel  and Will Martin. Anderson is Professor of Economics at the University of Adelaide and a Research Fellow in CEPR's International Trade programme; Dimarana and Hertel are at Purdue University; and Martin is at the World Bank.