World commodity markets and particularlythe markets for agricultural commodities remain highlydistorted despite the wave of liberalization that has sweptworld trade since the 1980s. Commodity markets are distortedon both the export and the import sides, with seriousimplications for world prices and their volatility. Very fewof the price distortions found in commodity markets can bejustified on the grounds of dealing with market failures.Rather, most policies that affect commodity prices aredesigned to transfer resources to favored groups by raisingor lowering prices. Policies may target the level and/or thevolatility of prices, and the pursuit of one type of policyobjective may have unintended consequences in generatingfurther distortions. Moreover, some commodity markets arecharacterized by imperfect competition. Where monopolies oroligopolies in trade arise, either because of governmentregulation or through other barriers to entry, distortionsmay arise that call for application of antitrust laws andother forms of pro-competitive policy action.
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