The international rice market has been characterised in the past two years by ample supplies, following record world production in 1999, faltering import demand and a marked drop in world prices. These features were in sharp contrast with those witnessed in the 1998 season, when brisk import demand had lifted the volume of trade to a record high and had sustained prices. This transition prompted substantial changes in national rice policies in the period under review, as their focus shifted from securing affordable and stable rice supplies for consumers to guaranteeing reasonable incomes to producers. As a result, many governments intervened in support of producers through large procurement purchases, direct income transfers, import restrictions or export incentives. However, commitments under the Uruguay Round Agreement on Agriculture (URAA) or structural adjustment programmes disciplined the use of these and associated measures.
Given the thinness of the international rice market,1 a small production shortfall in an important rice producing country often results in a surge in import demand and triggers a sharp rise in international prices, seriously hindering importers' ability to secure affordable supplies on the world market. Thus, most countries where rice is an important staple food have traditionally pursued a high degree of rice self-sufficiency to achieve food security. This policy approach did not change in the past two years, despite the substantial fall in international prices. Thus, many countries maintained expansionary rice production policies, especially traditional importers, such as Bangladesh, Brazil, Colombia, Indonesia, the Philippines and Nigeria, but also net exporting countries, such as Cambodia, India and Myanmar.
Rice is a highly sensitive product in many parts of Asia, where it constitutes the principal staple for consumers and a mainstay for the farming population. Despite the general drift towards market liberalisation, rice has remained among the most protected agricultural commodities, with the sector often subject to direct government intervention in domestic marketing, through state trading agencies, as well as high tariff and non-tariff barriers.
Since the introduction of major reforms in Bangladesh in the early 1990s, the Government has reduced its direct intervention in the rice sector. However, it has kept rice self-sufficiency as a target under the National Development Plan adopted in May 1999. Government strategy to achieve that objective relies on an intensification of the rice sector; investments in irrigation infrastructure, which contributed to a surge in the dry season Boro Crop; the provision of subsidised credit, especially to poor farmers, and the distribution of improved rice varieties. The Government accordingly authorised hybrid seed imports in 1998 and launched a National Water Policy in April 1999. Support prices for rice, the only crop together with wheat that benefits from minimum producer prices, were raised in both 1999 and 2000 in line with inflation. In addition, as domestic market prices fell below those levels, the Government substantially stepped up its paddy purchases in 2000.
Cambodia has been engaged in a process of reform since the early 1990s to facilitate the transition from a centrally planned to a market oriented economy. Rice self-sufficiency is identified as the principal way to ensure food security, a goal the country is pursuing through the intensification of production and improvement in marketing infrastructure, especially transport and processing. Against this background, the Government launched in 1999 an investment programme for the construction of water reservoirs and other irrigation projects, part of which is to be financed by the Asian Development Bank.
Since the mid-1990s, China has been committed to the objective of raising farmers' incomes while maintaining high levels of self-sufficiency in cereals under the "Governors Grain Bag responsibility system". In 1998, concerns over the financial burden associated with large stock holding, the poor quality of rice procured and falling cereal market prices, culminated in the adoption of the "Four Separation, One Perfection" reform,2 which relaxed the country's expansionary stance in respect of cereal policies. Since 1999, additional measures have been taken to cut production of low quality rice. Accordingly, the Government first reduced "protective prices" for early rice varieties (considered inferior quality rice) in 1999 and subsequently removed such varieties from the basket of commodities subject to minimum price support. Although the Government still strives to achieve a high degree of rice self-sufficiency, the emphasis is now on improving the sector's efficiency and the quality of the rice produced to keep abreast of changing consumer preferences.
In July 2000, India announced a new National Policy on Agriculture, which had the objective to tap the sector growth potential, strengthen rural infrastructure, promote value addition, create employment in rural areas, discourage migration to urban areas and prepare the sector to face the challenges arising from economic liberalisation and globalisation. Despite a large drought-induced production shortfall in 2000, the country has been confronted with large rice inventories following three bumper crop seasons and falling exports. Nonetheless, the country has continued to raise paddy support prices (Table I-4) and has intensified procurement purchases by the Food Corporation of India (FCI) and other government procurement agencies. As a result, the volume of procured rice surged to some 17.3 million tonnes in 1999/2000, 5.4 million tonnes more than in the previous season, and is expected to rise further to some 18.5 million tonnes in 2000/01. In 1999/2000, the Government launched a "National Agricultural Insurance Scheme", with premiums varying between 1.5 percent and 3.5 percent of the value insured. The scheme provides special incentives to small and marginal producers, in the form of a 50 percent subsidy on the premium, funded equally by the Central and State Governments, but is to be phased out over a five-year period.
After three years of heavy reliance on imports to meet domestic requirements between 1996 and 1998, Indonesia intensified its rice production policy to achieve rice self-sufficiency. This renewed emphasis was reflected in marked increases in support prices and large domestic purchases of paddy rice by Bulog, the National Logistic Agency in 1998, 1999 and 2000.
In January 2000, the Republic of Korea passed a new Agriculture Law, which emphasises the development of a sustainable agriculture and the maintenance of a high degree of rice self-sufficiency. Rice producers continued to benefit from attractive support prices, which were further raised by 5 percent in 2000. However, the quantities procured by the Government were lower in 1999 and 2000 than in the preceding years, to keep aggregate support to agriculture within the URAA limits, since rice accounts for over 90 percent of the total. The Government efforts to boost productivity concentrated on research and the promotion of high yielding hybrid, short maturity rice varieties.
Table I-1: Republic of Korea official rice purchases
1996 |
1997 |
1998 |
1999 |
2000* |
(.......................thousand tonnes ..............................) | ||||
1,267 |
1,224 |
928 |
876 |
906 |
Source:USDA
* Provisional
The Peoples Democratic Republic of Laos has supported paddy production, mainly through the promotion of the cultivation of a dry season crop under irrigation. This endeavour resulted in the increase in the dry season area from 18 000 hectares in 1996/97 to 87 000 hectares in 1999/2000. The target for the 2001 season is set at 120 000 hectares.
Malaysia has applied in recent years a policy consistent with a rice self-sufficiency target of 65 percent. In 2000, the target was raised to 70 percent and direct assistance to farmers was intensified. In particular, an ambitious programme focusing on productivity increases and quality improvements was announced at the end of 2000. The country, however, has kept the level of price support to rice farmers unchanged since 1998, resulting in a 6 percent decline in real terms by 2000.
Late in 1998, Myanmar adopted a two-pronged strategy to revitalise domestic paddy production, based on land reclamation and large-scale irrigation schemes. The new plan aims at expanding the paddy land base from 5.8 million hectares to 7.3 million hectares. Unlike in previous plans, the private sector is expected to play a key role in achieving these objectives. To stimulate private investments in rice production, the Government has offered 30-year long land leases, free provision of irrigation infrastructure and tax and tariff exemptions on machinery and equipment imports. In addition, large-scale producers were granted the right to export directly up to 50 percent of their output. Since 1998, the private sector has also been called upon to participate in the import and distribution of agricultural commodities and basic inputs. However, small paddy producers continued to pay land leases in kind, through compulsory rice sales, which, on average, have accounted for 12 percent of output. In 1998/99 the price paid for those deliveries was reportedly 50 percent below farm gate market prices.
In Pakistan, much of the Government intervention in rice production and marketing was eliminated in the mid-1990s. However, the Government still plays an active role in financing research and extension activities in order to encourage the expansion of hybrid rice cultivation and promote a more efficient use of basic inputs. Minimum producer prices are also announced every year, but mainly for indicative purposes. In 1999/00, support prices were raised by about 6 percent. In 2000/01, the increase was even more pronounced, being on the order of 15 percent. In late 2000, a dip in market prices well below the target levels prompted the Government to purchase paddy through the Pakistan Agriculture and Storage Supply Corporation, for the first time since 1995. However, only 25 000 tonnes were procured, as the Government was reluctant to intervene directly into rice market. Instead, it opted for giving indirect assistance to the sector by promoting exports through government-to-government deals.
The Philippines has pursued an active policy to raise rice production and reduce dependence on imports, through extension, promotion of high yielding hybrid varieties and irrigation. Consistent with this approach, new guidelines were issued on "agricultural land inactivity and premature conversion" in 1999 to prevent a diversion of agricultural irrigated land to other uses. The renewed emphasis placed on rice production was reflected in the announcement of a new target for hybrid rice cultivation, which is to be expanded from 600 000 hectares in 2000 to 1 million hectares in 2001, and a 12 percent increase in support prices in 1999, after three years of no change. In 1999, the paddy support price system was modified based on a two-tiered mechanism, depending upon the cropping season. As of January 2000, the National Food Agency (NFA), the state agency responsible for domestic rice marketing and international trade, was also empowered to pay an additional pesos 0.50 per kilo (US$ 12.4 per tonne) for paddy delivered to the agency. The premium was paid in kind, through fertiliser deliveries. From July 2000, it could also be exchanged for certified seeds. The quantities of rice officially procured soared in 1999 and 2000 as prices started falling, exceeding the previous peak of 1990.
Table I-2: Philippines official paddy procurement
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
(........................................................... thousand tonnes .......................................................) | ||||||||||
572.2 |
555.1 |
419.6 |
155.1 |
60.7 |
7.8 |
124.3 |
101.0 |
58.8 |
560.5 |
602.8 |
Source: Philippines National Food Authority
Price support to paddy producers in Thailand continues to be based on a paddy mortgage scheme (Table I-3) operated by the Bank for Agriculture and Agricultural Co-operatives. Under the scheme, participating farmers receive loans at preferential credit rates for up to 90 percent of the value of the paddy mortgaged at the official support price. Although the volume of rice pledged fell substantially between the 1996 and the 2000 seasons, it rebounded in 2001.
Table I-3: Thailand's paddy mortgage scheme
Quantity |
Value | ||
thousand tonnes |
million Baht |
US$ million | |
1995 |
677.3 |
4,229.4 |
168.1 |
1996 |
697.8 |
3,938.7 |
154.1 |
1997 |
786.4 |
2,968.7 |
65.6 |
1998 |
865.1 |
2,938.7 |
81.0 |
1999 |
1,026.1 |
3,262.8 |
85.5 |
2000 |
1,181.3 |
3,286.4 |
76.3 |
2001 |
1,402.9 |
5,132.4 |
118.7 |
Source: Bank for Agriculture and Agricultural Co-operatives
Since 1999, the mortgage scheme has been broadened to allow farmers to deliver milled rice, in addition to paddy, as loan collateral to the Marketing Organization for the Farmers and the Public Warehouse Organization. In 2000, each of these organizations was empowered to procure 500 000 tonnes of milled rice at the loan rate. In addition to the above mortgage scheme, 1.9 million Baht (US$ 44.1) were allocated to a number of public institutions for the purchase of about 380 000 tonnes of paddy rice, for subsequent milling and local sale. Although the volume of rice that received price support through the above systems was substantially raised, the level of official or "target prices" remained unchanged in the last two seasons. Further measures to assist rice producers were adopted with the approval, in September 2000, of a commodity insurance scheme covering rice and maize and the allocation by the Budget Department of one billion Baht (US$ 24.3 million) for the programme. The plan insures producers against natural disasters such as floods or drought and will compensate farmers only for the cost incurred within a ceiling of 1000 Baht per rai (US$ 152 per hectare) for the first rice crop and 1 500 Baht per rai (US$ 228 per hectare) for the second. In 2000, the premiums, to be shared equally by the farmer and the Government, were set at 59 Baht per rai (US$ 9.0 per hectare) for the first rice crop and at 30 Baht per rai (US$ 4.6 per hectare) for the second.
Since Sri Lanka has largely deregulated its domestic rice market and considerably limited the responsibilities of the Paddy Marketing Board, support to the rice sector mainly concentrates on promoting hybrid rice cultivation through the provision of basic irrigation infrastructure and fertiliser subsidies. Although the Government does not usually intervene to sustain producer prices through market operations, it continues to announce official paddy prices for indicative purposes. These official prices were raised by more than 50 percent between 1998/99 and 2000/01 in real terms.
Up until 1999, Vietnam was mostly concerned with the conversion of paddy fields to other uses. Consequently, the Government fixed the pool of irrigated paddy land at 4.2 million hectares and promoted the rehabilitation of eroded or hilly fields within that pool. In June 2000, against the background of low domestic prices and a relatively poor export performance, the Government cut the area reserved to irrigated rice cultivation to 4 million hectares, with the provision to allocate the diverted 200 000 hectares with lower productivity to other agricultural commodities. Preferential credit conditions were also offered to paddy producers in 1999 and 2000. In 1999, the maximum credit granted to paddy producers for production, without collateral, doubled to 10 million Dong (US$ 720). In the face of low producer prices, in March 2000 commercial banks were asked to reschedule old debts and to extend new loans to paddy farmers. In addition, interest rates on investment loans were cut from 9 percent to 7 percent per year. In June 2000, a "Credit Guarantee Fund" was set up to offer loans to farmers, small enterprises and co-operatives at preferential rates. The Government also gave credit subsidies for the purchase and storage of rice by traders, in an attempt to lift prices (see trade section).
Among other Asian countries, the Islamic Republic of Iran promotes rice production through research, distribution of basic inputs and a support price system. In 1999, support prices were raised by 12 percent. The increase was even sharper in 2000, varying between 35 and 40 percent depending on the variety, as the country was confronted with a large production shortfall following recurrent droughts. The country reported to have distributed 300 tonnes of improved variety seeds in 1999, compared with 200 tonnes in the previous year.
In recent years, Africa has dramatically increased its dependence on imports to meet its domestic requirements. In the major rice producing and consuming countries, assistance to the sector has dwindled since the dismantling of commodity marketing boards in the 1980s and 1990s. The modest support now provided is mostly confined to infrastructure development, often financed with international assistance, and to limited distribution of basic inputs to poor farmers. Official controls on domestic prices and market intervention are seldom practised in the region and border protection is relatively low.
Burkina Faso conducts a policy of limited assistance to rice producers, with most aspects of production and marketing liberalised. Under its second Structural Adjustment Programme, the country launched a plan of action for the organization of agriculture, which sets specific targets for the rice sector. Under the land conversion plan, 800 hectares of low-lying rice fields for cultivation under rainfed conditions were developed in 1998, 1000 hectares in 1999 and 1000 hectares in 2000. The plan envisages the development of a further 4000 hectares between 2001 and 2006. Similarly, Benin promotes the expansion of rice production in inland valleys. Since the market for rice and basic agricultural inputs has been liberalised, the Government only provides short-term production credits to poor farmers.
In 2000, Mali started implementing a programme to develop the rice sector with the goal of achieving rice self-sufficiency in 2002. The programme envisages the development of 30 000 hectares of new land for rice cultivation. The Government also plays an active role through the "Office du Niger" in developing irrigation facilities and supplying water irrigation at subsidised prices.
Egypt has traditionally imposed limitations on rice cultivation through area quotas to save irrigation water, currently provided free-of-charge. At the same time, the country has supported the intensification of the sector, principally through research and the distribution of high yielding hybrid varieties, which have boosted yields to a world record. In addition, the country launched a 20 yearlong land reclamation programme to expand the area of arable land. The programme comprises an ambitious "New Valley" irrigation project in the south-western desert, which will rely on the construction of a pumping station and of a 72 kilometres-long irrigation canal from Lake Nasser, and a project in the western desert that will draw on underground water to irrigate 100 000 hectares.
One major form of support to cereal producers in Nigeria has consisted of high subsidies on fertilisers, until they were abolished in 1998 as part of a wider market liberalisation programme. In May 1999, fertiliser subsidies were reintroduced and government agencies were instructed to purchase fertilisers domestically. The new policy entails purchasing 120 000 metric tonnes of fertilisers at 2 904 million (US$ 28.75 million) for sales to farmers, at 25 percent subsidy. The country has also announced the constitution of new state commodity marketing companies.
In Latin America and the Caribbean, domestic rice markets have been widely liberalised and border protection constitutes the dominant form of protection to the sector. In many countries in the region, rice producer organizations have reacted to the disengagement of the public sector by taking over many of the functions previously held by governments including development and information activities.
In Costa Rica, rice remains a strategic commodity and producer (as well as consumer) prices continue to be subject to direct government control. Producer support prices were raised both in 1999 and 2000, but trailed behind inflation, resulting in a 5 percent decline in real terms.
In the Dominican Republic, the National Rice Commission fixes minimum and maximum purchasing and selling prices and intervenes in the market through a price stabilisation agency, INESPRE. In May 1999 this agency procured some 41 000 tonnes of paddy at a minimum price of US$ 330.67 per tonne.
In 2000, Guyana lifted all sale taxes on basic inputs such as fertilisers and pesticides and increased the volume of seeds it distributes to farmers through the Rice Board. Efforts also concentrated on large infrastructure works in the rice producing areas under an extensive programme of rehabilitation of the drainage and irrigation systems.
Mexico is one of the few countries in the region that currently implements a programme of de-coupled payments to producers, under "Procampo". Since 1998 this programme has been supplemented with direct price support under a "Marketing Support Programme" covering a volume of 308 000 tonnes of paddy rice, about three quarters of the national output. Under the scheme, rice producers received a premium on the volume they marketed equal to pesos 150 (US$ 17) per tonne for the winter crop in 1998 and pesos 250 (US$ 26) per tonne for the winter and summer crops in 1999 and 2000.
Brazil continues to operate various price support schemes, including a loan system that allows farmers to pledge their rice as collateral, valued at a minimum guaranteed price. Following a recovery in production and falling prices in mid-1999, the volumes of rice offered under the programme increased substantially, which prompted the Government to allocate funding in August 1999 to store an additional 500 000 tonnes of rice.
Colombia's Government does not directly intervene in the rice market through purchases or sales. However, in recent years, the Government has required millers and processors to purchase all domestic rice supplies at a predetermined price before releasing import licenses. A similar scheme is reportedly in operation also in Ecuador, Honduras and Peru.
Table I-4: Paddy support prices in selected countries (price per tonne)
Countries |
Prices in National Currencies |
Prices in US dollars | |||||||||||
Nominal prices |
Real prices (deflated by CPI 1995/96=100) |
||||||||||||
Developing |
Currency |
1998/99 |
1999/00 |
2000/01 |
1998/99 |
1999/00 |
2000/01 |
1998/99 |
1999/00 |
2000/01 | |||
Exporters |
|||||||||||||
India: common |
Rupee |
4400 |
4900 |
5100 |
3454 |
3590 |
3552 |
104 |
113 |
110 | |||
grade A |
Rupee |
4700 |
5200 |
5400 |
3690 |
3810 |
3769 |
111 |
120 |
116 | |||
Myanmar |
Kyat |
16774 |
1/ |
16774 |
1/ |
n.a. |
7600 |
6285 |
. . . |
2713 |
2712 |
n.a. | |
Pakistan: Irri |
Rupee |
4375 |
4625 |
5125 |
3376 |
3426 |
3640 |
95 |
89 |
90 | |||
Basmati |
Rupee |
8250 |
8750 |
9625 |
6366 |
6481 |
6836 |
179 |
169 |
169 | |||
Thailand |
Baht |
5460 |
2/ |
5460 |
2/ |
5460 |
2/ |
4509 |
4531 |
4457 |
151 |
143 |
127 |
Importers |
|||||||||||||
Bangladesh |
Taka |
7588 |
7913 |
8250 |
p |
6541 |
6423 |
6435 |
164 |
163 |
162 | ||
Costa Rica |
Colón |
74837 |
80000 |
84783 |
51223 |
49689 |
47444 |
291 |
280 |
275 | |||
Indonesia |
`000 Rupiah |
1000 |
1400 |
1400 |
701 |
629 |
633 |
103 |
158 |
187 | |||
Iran, Rep. of |
`000 Rial |
1181 |
1323 |
1856 |
666 |
612 |
761 |
674 |
755 |
1052 | |||
Korea, Rep. of |
`000 Won |
1309 |
1376 |
1452 |
1111 |
1161 |
1208 |
992 |
1147 |
1274 | |||
Malaysia |
Ringgit |
800 |
3/ |
800 |
3/ |
800 |
3/ |
726 |
699 |
688 |
214 |
211 |
211 |
Philippines |
Peso |
8000 |
9000 |
9000 |
6369 |
6711 |
6461 |
198 |
237 |
211 | |||
Sri Lanka |
Rupee |
7420 |
10000 |
12000 |
5361 |
6906 |
8108 |
119 |
145 |
164 | |||
Turkey |
Million Lira |
145 |
240 |
330 |
23 |
23 |
20 |
527 |
529 |
497 | |||
Developed |
Currency |
1998/99 |
1999/00 |
2000/01 |
1998/99 |
1999/00 |
2000/01 |
1998/99 |
1999/00 |
2000/01 | |||
EC |
Euro |
316 |
298 |
298 |
293 |
272 |
265 |
365 |
313 |
260 | |||
Japan |
`000 Yen |
263 |
4/ |
259 |
4/ |
252 |
4/ |
256 |
253 |
248 |
2240 |
2520 |
2243 |
United States |
US $ |
143 |
5/ |
143 |
5/ |
143 |
5/ |
134 |
131 |
127 |
143 |
143 |
143 |
p provisional n.a. not available
1/ Myanmar Agriculture Produce Trading Company (MAPT) average of procurement prices
2/ Paddy, 5% broken
3/ Including a production subsidy of RM 250 per tonne of paddy delivered to a licensed mill or drying facility
4/ Husked rice basis
5/ Marketing Assistance Loan Rate
In April 2000, Japan approved three basic goals of the country's agricultural policies in the medium term, i.e. the stability of food supplies; the development of a sustainable agriculture; and the promotion of the multi-functional potential of agriculture. As part of its policy to reduce paddy production, Japan continued to implement a land diversion programme, and reduced producer prices by 1.8 percent in 1999 and by 2.7 percent in 2000. However, since the measures implemented were not sufficient to prevent the accumulation of large rice inventories, the Government adopted a special emergency package in September 2000. As part of the measures announced, the paddy area subject to diversification was increased by 100 000 hectares 3 to 1 063 000 hectares, or 22 percent of the total paddy area; farmers' compensatory payments for land diverted from paddy to forage crops were raised from Yen 730 000 to Yen 930 000 per hectare (US$ 8 530), applicable in 2001 only; the Government also announced emergency purchases of 400 000 tonnes from the 2000 crop, of which 150 000 tonnes to replace old publicly-held stockpiles that will be used for feed; a reserve of 750 000 tonnes for external food aid was established.
Under the 1996 FAIR Act, rice producers in the United States receive government assistance through Production Flexibility Contracts (PFC), which entitle eligible producers to receive fixed but declining income payments per hectare, based on a 1996 producer contract area. From 1998 to 2000, rice PFC holders benefited from supplementary payments under the emergency farm assistance legislation. As a result, overall Government outlays to rice producers under the PFC and emergency marketing assistance programmes rose from some US$ 700 million in 1998 to around US$ 900 million in 1999 and 2000, twice as much as in 1996 and 1997 (Table I-5). Besides income transfers, the FAIR Act provides direct price assistance to rice producers, under the marketing loan programme, which compensates farmers for the difference between a "world" price and a national loan rate equivalent to US$ 143 per tonne for paddy. Since market prices exceeded the loan rates up until 1998, little payments were made under the loan programme for the first two years of the Act. However, as world prices started to fall in 1999, loan payments to producers rose from US$ 14 million in 1998 to US$ 395 million in 1999 and to US$ 415 million in 2000. Under the Emergency Supplementary Appropriation Act of 2001, the US$ 75 000 per person overall limit on marketing loans was also doubled to US$ 150 000. As of 2000, the rice sector also benefited, together with other crops, from an insurance reform, which allocates US$ 8.2 billion in five years, partly to finance increases in premium subsidies of the order of 80 percent to 90 percent.
Table I-5: United States rice policy under the Production Flexibility Contracts and Marketing Loan Programmes
Season average paddy market price |
Paddy loan rate |
Marketing loan/certificates |
Contract Payments 1/ |
Total payment | |
US$/tonne |
US$/tonne |
US$ Million |
US$/tonne |
US$ Million | |
1996/97 |
220 |
143 |
0 |
61 |
455 |
1997/98 |
214 |
143 |
0 |
60 |
448 |
1998/99 |
196 |
143 |
14 |
64 |
717 |
1999/00 |
131 |
143 |
395 |
62 |
932 |
2000/01 |
125 2/ |
143 |
415 |
57 |
897 3/ |
1/ Includes payments under the Emergency Marketing Assistance Programmes
2/ From August 2000 to March 2001.
3/ Forecast as of July 12,2000.
Source: USDA
In line with the CAP reforms launched in 1992 and the 1994 URAA, the European Community (EC) amended its rice policy regime from 1997/98 to 1999/2000. The changes were based on compensatory area payments in return for a 15 percent reduction in intervention prices, implemented through annual cuts of 5 percent between 1997/98 and 1999/2000. As a result, the rice intervention price dropped from Euro 351.00 per tonne in 1996/97 to Euro 298.35 per tonne in 1999/2000. Producers were compensated through a three-fold increase in the area payment between 1997/98 and 1999/2000, within a maximum national guaranteed area. For instance, Italian producers received Euro 318 per hectare in 1999/2000, up from Euro 106 per hectare in 1997/98. However, in Spain, a 7.3 percent overshooting of the rice area ceiling resulted in a 44 percent cut in eligible payments in 1999/00, from Euro 334.33 per hectare to Euro 187.89 per hectare.
A fall in rice market prices in member countries over the past two years led to an increase in EC intervention purchases and growing intervention stocks. To tackle the structural market surpluses, which have arisen since the opening of the market to imports and the cut in subsidised exports, the EC Commission released, on 7 June 2000, a proposal for a rice policy reform for implementation in the 2001/2002 crop season, which hinged on an abolition of the support prices and the system of mandatory intervention purchases and the application of a land set-aside (Box I-1). However, as major EC producing countries did not agree to the elimination of the intervention system, the proposal has been temporarily shelved.
Box I-1 Proposed Change in EC Rice Policy
EC CURRENT RICE POLICY REGIME |
EC COMMISSION REFORM PROPOSAL |
PRODUCTION POLICY | |
Since 1999/2000, support intervention price is set at 298/35 Euro/tonne for paddy rice |
Support intervention price to be abolished in 2001/2002 |
Mandatory intervention purchases. By 1 September 2000, intervention stocks had readhed 699 000 tonnes, of which 373 000 tonnes of Indica rice and 308 000 tonnes of Japonica rice |
Public intervention system to be abolished and replaced with private storage aids |
Compensatory area payments set at 52.65 Euro per tonne multiplied by the average regional yield. On average, EC producers were eligible to receive 328.98 Euro per hectare in 1999/2000, within the base area |
Payments to be raised to 63 Euro per tonne (same level as for grains) |
No provision for compulsory set aside |
Rice to be subject to compulsory set-aside. The application of the 10% set-aside currently in place for grains would lower production by an estimated 150 000 tonnes |
IMPORT REGIME | |
Since July 1995, imports of paddy rice and brokens have been subject to URAA bound tariff rates (211 Euro/tonne for paddy and 128 Euro/tonne for brokens in 2000/01) |
No change |
Under footnote 7 of the US/EC Blair accord, the duty-paid import price for husked Indica and husked Japonica rice cannot exceed by more than 80% and 88% respectively the effective buying-in price for intervention for those qualities. For milled Japonica and milled Indica rice, the difference cannot exceed 167% and 163% respectively. |
In absence of an intervention price, the current method to estimate import duties for husked and milled rice cannot be applied. It is not clear whether the removal of the intervention price will result in the application of the URAA bound tariff, as is the case for paddy and broken rice. |
Husked Indica rice imports were subject to a duty of about 208 Euro/tonne at the beginning of the 1999/2000 rice season. |
URAA bound tariff for husked rice was 289 Euro/tonne in 1999/00, much higher than the levy effectively applied. The change in the system of determination of the levy is likely to require negotiation under Article XXVIII of GATT 1994 (Modification of Schedules). |
Basmati rice imports are subject to a reduction of Euro 250/tonne of the applicable duty. |
Subject to re-negotiation with the interested parties, principally India and Pakistan. |
EXPORT REGIME | |
Subsidised exports subject to quantity and value ceilings |
No change |
Because of the strategic importance of rice as a major staple food commodity, governments used to intervene to guarantee affordable supplies to consumers through market operations and wide-scale public distribution systems. Since market liberalisation in the 1980s and 1990s, much of this intervention has been eliminated or diminished, especially in Africa and South America. On the other hand, state trading organizations have retained much responsibility in domestic rice marketing in several countries in Asia.
Since 1995, the movement of rice across provinces in China has been restricted and individual provinces encouraged to produce enough cereals to meet their requirements. The 1998 reform introduced further restrictions on marketing as private traders were forbidden to purchase rice directly from farmers and were allowed to buy only from state grain agencies. This paddy procurement arrangement appears to have been relaxed in various provinces in the past two years. Following five years of bumper cereal crops, the level of rice kept in national stocks is estimated to have risen considerably, a large part of which is stored in public grain facilities. In order to reduce the associated financial burden on provincial governments and improve the quality of the rice procured, the grain bureaux have limited their purchases, reduced prices and adopted more stringent quality specifications for procurement. In 1999, the country launched a major investment plan to expand its cereal storage capacity by 20 million tonnes to reduce the losses associated with the holding of grains in poor storage conditions.
India maintains direct government controls over the domestic grain sector, under the 1955 Essential Commodities Act, which contains provisions to limit cereal holding by the private sector and to restrict cereal movements across provinces. Despite efforts in 1997 to scale back the responsibilities in domestic marketing and international trade of the Food Corporation of India (FCI), the public food distribution agency continued to play a dominant role in rice procurement4 and distribution. In an attempt to reduce the large budgetary outlay of the FCI, in 2000 India raised the prices of rice sold throughout the Public Distribution System (PDS). Issue prices went up by 25 percent for "Grade A" rice 5 sold to consumers above the poverty line and by 61 percent for "common" rice sold to the below-poverty line group. In early 2001, the Indian Government launched a new rice distribution programme targeted to the very poor through the disposal of some of its surpluses. As a result, the public distribution system is currently divided into three categories of consumers: those belonging to the "above-poverty line" group, who can buy unlimited quantities of rice at rupees 11.3 per kg (US$ 0.25 per kg), low-income consumers "below the poverty line", who can purchase up to 20 kilos per month per household at rupees 5.65 per kg (US$ 0.12 per kg), and, finally, a new category of the "poorest among the poor" who are offered up to 25 kg 6 per month per family at rupees 3 per kg (US$ 0.07 per kg).
In an attempt to rationalise FCI activities, the Government passed a new national food grain storage policy in 2000, with the purpose to modernise the grain basic marketing infrastructure and to increase its efficiency. In particular, the law envisages a greater participation of the private sector in the storage and handling of bulk cereals and considers the privatisation of a large part of the storage facilities currently owned by the FCI. To facilitate the transition, the Government is offering a five-year tax exemption on private investment in cereal storage and transportation infrastructure, to be followed with 30 percent tax rebates.
In 1998, Indonesia initiated a market liberalisation process under a structural agreement with the IMF, which diminished the role of BULOG, the National Logistic Agency, in domestic food crop marketing and imports. Since 1999, the agency's authority to procure rice has been restricted to paddy, which it purchases through local logistic agencies, "DOLOG", while it abstains from purchasing milled rice from millers. Moreover, under the 1998 reform, the agency is to rely on banking credits at market rates to finance its operations. BULOG has, nonetheless, kept the responsibility to stabilise the domestic rice market through supply releases from stocks and to operate a Government subsidised rice distribution scheme to the needy. Under this programme, low-income households were entitled to receive 10 kilos of rice per month, per person, at rupees 1000 per kilo (US$ 0.14 per kilo) in 1999. The agency also sells rice to military and civil servants as part of their salaries. In 1999 and 2000, the agency is estimated to have released some 4.8 million tonnes of rice on the domestic market, half of which under its special programmes and half as regular market operations, carried out through DOLOG local agencies.
Japan reduced in 1999 and 2000 the price of rice sold to wholesalers (Table I-6). The cut, which applied to both domestic and imported rice, was most pronounced in 2000 at 6 percent. Japan also took steps to reduce the level of rice stocks by shifting supplies to feed under a "rice for feed scheme". In 1999, some 170 000 tonnes were allocated for feed use by the Government. Under the 2000 emergency programme, the amount has been targeted at 150 000 tonnes.
Table I-6: Japanese Government resale prices of domestically produced rice (fiscal year)
1990 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
Yen per tonne | ||||||
306,450 |
302,050 |
305,050 |
301,683 |
297,183 |
294,100 |
289,383 |
Source: FAO and USDA
In an endeavour to raise the competitiveness of its producers, the Republic of Korea launched several initiatives in 2000 to improve the marketing of rice. As part of this programme, the Government set up an Internet site, to improve information exchange. It also announced a plan for the construction by 2004 of 360 rice processing centres, with drying, milling and storage facilities.
In July 2000, Malaysia restricted the movement of rice from the Kelantan State, in an attempt to curb illegal imports of rice from Thailand. This measure was subsequently lifted in August.
In the Philippines, the National Food Agency (NFA), which has the responsibility to stabilise the domestic rice market through rice distributions in deficit areas and urban wholesale markets, lowered the level of its sale prices in October 1999, but restored them to their previous levels in January 2000. Following the extension of its mandate to other commodities, the NFA introduced "the Enhanced Retail Access for the Poor" (ERAP) programme in 1999, a move that might be indicative of a progressive shift from wide-scale rice distribution to more targeted sales to low-income groups.
Syria, which also used to sell limited quantities of rice at highly subsidised prices, announced the suspension of that programme from November 2000.
Expansion in rice production and large fluctuations in domestic prices in recent years have induced Thailand to allocate some US$ 205 million to expand the country's grain storage capacity to sustain its rice mortgage scheme. The new warehouses, to be located in the main paddy growing regions, would also work as milling and packaging centres to boost the quality and marketability of the product. The country was also reported to have promoted a new scheme through the Bank for Agriculture and Agricultural Co-operatives to improve access of producers to market information, including through Internet.
Consistent with the policy to raise the quality of the rice marketed, Vietnam presented a draft programme in early 2000 to enhance its food processing system over the next 20 years. Measures specific to the rice sector include an expansion in the rice drying, husking and storage capacity. By 2005, the plan envisages to raise the rice drying potential by 6 to 7 million tonnes through the provision of small machinery to farmers, and the country's husking capacity by up to 6 million tonnes per year.
As of January 2000, the Government of Sudan abolished marketing taxes and fees on agricultural products, including rice, to increase private sector's participation in domestic marketing.
Costa Rica maintains control on the marketing prices of rice through the imposition of price ceilings on sales to wholesalers, retailers, and consumers. Although those prices changed several times since 1998, the marketing mark-ups were kept at 3 percent from the wholesaler to retailer and at 10 percent from the retailer to consumer (Table I-7).
Table I-7: Costa Rican maximum sale price for rice (20 percent broken)
Implementation date |
Miller to wholesaler |
Wholesaler to retailer |
Retailer to consumer |
Colon per kilo |
|||
28/09/98 |
146.68 |
151.09 |
166.00 |
10/06/99 |
137.54 |
141.67 |
156.00 |
03/09/99 |
157.68 |
162.41 |
179.00 |
28/11/00 |
168.57 |
173.63 |
191.00 |
Source: Oficina Arroz, Informe Annual de la Actividad Arrocera, 1999-2000.
While the rice sector operates in a widely liberalised environment in El Salvador, the Government promoted, in August 2000, a strategic coalition among all private sector participants. This "alliance" seeks to stabilise market supplies and domestic prices, so as to stimulate demand for domestically produced rice. It is based on the introduction of guidelines and standards for rice market transactions at the country's agricultural products market exchange, BOLPROES, as the main instruments to enhance market transparency and competition.
In St Lucia, rice was kept among the basic commodities subject to Government wholesale and retail prices ceilings, under the Price Control Order 1999, which replaced the Price Control Order of 1984.
Concern over the negative impact of rice production on the environment intensified in 1999 and 2000, and several countries adopted measures to reduce paddy cultivation in fragile ecosystems. In general, these called for the withdrawal of eroded or marginal land from paddy production and increases in productivity, through an intensification of production and a wider use of improved varieties in areas suitable for the crop. The environmental impact of diverting land out of rice in traditional producing areas has caused concern in some developed countries, which fear, in particular, the surge of soil salinity or erosion problems and the endangering of wild bird habitats. Several other countries reported measures to control excessive application of fertilisers and pesticides or the adoption of water-saving technologies.
In China, subsidies in the form of rice distributions and income compensation were reportedly given in fragile ecosystems, especially in the Western regions, to farmers willing to abandon rice cultivation and return the land to pasture or forests. Under the programme, farmers along the Yangtze River were given 2 250 kilo of paddy per hectare of land returned, as well as a cash payment. In the upper and middle reaches of the Yellow River, the reported subsidy in kind was 1 500 kg of paddy per hectare. Compensation to farmers is to be maintained for five to eight years. Vietnam also removed 200 000 hectares of highly eroded lands from its paddy land base, through primarily in an attempt to rationalise production. In Mexico, rice cultivation was seriously reduced in Sinaloa, under the regional water conservation programme. Burkina Faso has strengthened its control over the environmental impact of rice production, to ensure its sustainability. Accordingly, rice production projects are increasingly subject to environment impact analyses. In addition, the country is promoting water-saving schemes and the planting of trees around rice fields to preserve bio-diversity. Among the developed countries, Japan implemented a programme to promote sustainable production methods among paddy producers, to reduce nutrients in drainage water and lower methane emissions.
Although international trade in rice continues to account for only a small share of global production, some 4 percent in 2000, it has risen considerably, volume-wise, since 1995,7 a period which coincides with the beginning of implementation of the URAA. The new international policy environment, however, contributed only to a small extent to that trade dynamism. Rather, growth was driven by a surge in import demand, following weather-induced production shortfalls in several important producing/consuming countries, and large availabilities in traditional exporting countries.
Trade in rice in Bangladesh has been liberalised since the early 1990s and the private sector undertakes the bulk of imports. As of 1 January 2000, the country reintroduced a 5 percent duty on rice imports it had lifted in 1998, when the country was facing a production shortfall. However, imports remained exempt from a 2.5 percent infrastructure tax applicable to other products.
In China, the Government currently exercises full control over international trade in rice and other cereals. Decisions on the volume of imports and exports 8 are taken by the State Planning and Development Commission in consultation with the State Council. The Ministry of Foreign Trade and Economic Co-operation (MOFTEC) then administers cereal trade, while actual transactions are carried out by a state trading enterprise, the China National Cereals, Oils and Foodstuffs Import and Export Company (COFCO). In 1999 and 2000, the level of rice exports remained high compared with previous years, consistent with government's policy to reduce the size of state inventories.
Rice imports into Hong Kong, SAR are carried out autonomously from China mainland. They are currently regulated through a licensing and import quota system but are duty-free. Quotas have traditionally been allocated to a number of registered firms according to fixed proportions. To enhance market competition, this system was relaxed beginning in 1997, when authorised traders were allowed to increase their allocation by applying for an "optional" quota. Initially, the aggregate volume of imports under the optional quota could not exceed 30 percent of overall import requirements. This share was raised to 40 percent in 2000.
Fiji regulates rice imports through duties of 27 percent applied on milled and broken rice and 10 percent on paddy/husked rice shipments. In late 2000, the Government announced the re-introduction of a licensing system for husked rice, under which only companies holding a quota license will be permitted to import.
Since 1997, the private sector in India has been allowed to import rice with more than 50 percent brokens, free-of-duty. Following tariffication under the URAA and the removal of the quantitative restrictions that had been in place for several decades under the GATT Balance-of-Payment provisions, bound tariffs on rice were revised from 0 percent to 70-80 percent in 2000. On 1 April 2000, the country raised the level of applied tariffs up to the bound level of 80 percent for husked rice and broken rice and 70 percent for milled of semi-milled rice.
Following the 1998 reform, Indonesia relaxed Bulog's rice import monopoly and allowed rice imports by the private sector for the first time in 1999. However, private imports were initially restricted to high quality rice of no more than 5 percent broken and were charged a 25 percent import duty. The quality restriction was withdrawn in January 2000 and a tariff of Rupees 430 per kilo (US$ 58 per tonne), equivalent to a 30 percent ad-valorem duty, was imposed on all imports, whether private sector or BULOG.
Following a bumper crop in 2000, Malaysia strengthened its border controls to prevent unauthorised movements into the country and suspended, early in 2001, the issuance of import licenses on rice by-products.
Although the National Food Agency (NFA) continues to handle the bulk of imports in the Philippines, private traders have been authorised since 1997 to import special, fancy or glutinous rice, subject to a 50 percent duty, under a preferential access quota. In 1999, private traders were also permitted to import ordinary rice. Under the URAA, the country has committed to expand access under this quota by 20 000 tonnes per year, from 59 000 tonnes in 1996 to 239 000 tonnes in 2005.
Faced with rice shortages in 1999, Sri Lanka temporary lowered the duty on rice imports from 35 percent to 10 percent during the last quarter of the year. The tariff was brought back to its previous 35 percent level as of January 2000, a move that preceded the announcement of a suspension of new import licenses in August 2000.
Although a major rice exporter, Vietnam imports some rice from neighbouring countries, in particular Cambodia. In April 1999, the country raised import levies from 10 percent to 20 percent for all types of rice, except paddy, which remained duty-free. A further rise to 30 percent was implemented in July 2000.
In Africa, member countries of the West African Economic and Monetary Union (Union Économique et Monétaire de l'Afrique de l'Ouest - UEMOA),9 applied in January 2000 a common external tariff (CET), while allowing free movement of goods within the region (Table I-8). The mechanism applied to imports from non-member countries distinguishes four categories of commodities, subject to a fixed tariff rate; introduces a system of permanent tariffs and taxes common to all members; and sets temporary tariff and taxes, which can be optionally applied by individual countries.
Table I-8: UEMOA common external tariff and other duties 1/
Category |
Ad-valorem tariff |
Statistical tax |
Solidarity tax |
percent |
|||
0 |
0 |
1 |
1 |
1 (paddy/seeds) |
5 |
1 |
1 |
2 (all other rice) |
10 |
1 |
1 |
3 |
20 |
1 |
1 |
Source: UEMOA
1/ Applicable to c.a.f. value.
These temporary tariffs and taxes can be introduced under two optional schemes that give country members the possibility of introducing additional protection. The first, which is designed to compensate the loss of protection ensuing from the application of the CET, consists of a declining tariff until 2003 (Table I-9). The second allows countries to shield their markets from world price fluctuations through the application of a 10 percent duty on a "trigger price". 10
Table I-9: UEMOA optional tax on extra-regional imports
Period |
Low tax |
High tax |
percent | ||
from 01/07/99 to 31/12/99 |
10 |
20 |
from 01/01/00 to 31/12/00 |
7.5 |
15 |
from 01/01/01 to 31/01/01 |
5 |
10 |
from 01/01/02 to 31/01/02 |
2.5 |
5 |
from 1/01/03 |
0 |
0 |
Source: UEMOA
As a result of the implementation of the CET, Benin raised, in January 2000, the rate applied on husked or milled rise from 5 percent to 10 percent, while the tariff applied on paddy and rice seeds imports remained at 5 percent. A value-added tax of 18 percent continued to be applied on imports.
The application of the CET in Cote d'Ivoire in 1999 resulted in an increase in the applied external tariff from 5 percent to 10 percent for husked rice, while it lowered the rate applied on rice with 15 percent or less broken from 25 percent to 10 percent, and that of rice with over 15 percent broken from 15 percent to 10 percent. Imported rice is also subject to a value-added tax of 20 percent.
Late in 1999, following a sharp increase in rice shipments, Kenya introduced a new levy of 25 percent, or 7.50 Kenyan shillings per kilo (about US$ 100 per tonne), whichever is the highest, in addition to the 50 percent duty already applied.
In January 1999, Nigeria eliminated a 25 percent tariff rebate on cereal imports it had granted since 1995, and re-applied the full 50 percent custom tariff rate on rice imports. As of November 1999, it also re-instated the inspection of import shipments and, early in 2001, announced a further increased in the rice import tariff to 75 percent, as a means to protect farmers from external competition.
Sudan was reported in January 2001 to have temporarily lifted all duties on rice and other cereal imports until the start of the new season in October, to ease temporary supply shortages.
In the Latin American and Caribbean region, Costa Rica raised, in March 1999, the tariffs it applied on husked rice from 20 percent to 35 percent, similar to the rate already applied to milled rice and equal to the URAA bound level. At the same time, however, the country authorised the import of 60 000 tonnes of husked rice at a 10 percent tariff rate, for delivery between April and June 1999. As the prevailing low international price situation persisted, the country resorted to a one year special price safeguard on imports of husked and milled rice in December 1999, which resulted in an additional 6 percent duty.
Following renegotiations of tariff bindings with the WTO for key agricultural products, the Dominican Republic revised its rice tariff ceiling from 40 percent to 111.5 percent in 2000. The country also committed to open a 12 410 tonnes quota at a 20 percent tariff rate in 2000. The size of the preferential quota will be expanded progressively to 15 262 tonnes in 2005. By that time, the out-of-quota applied tariff will be lowered to 99 percent.
In October 1999, El Salvador raised the import tariffs on all types of rice to 40 percent.11 Previously, the rate was set at 20 percent for paddy and 35 percent for the other rice products. At the same time, the country opened a duty-free tariff quota of 25 000 tonnes to cover a production shortfall, for delivery between 1 January 2000 and 31 August 2000.
In 1999, Honduras raised the tariff applied to milled rice imports from 30 percent to 45 percent, while maintaining at 20 percent the rate for husked rice. Following a five-year agreement between producers and importers that committed the latter to domestic rice purchases at a predetermined price, the Government lowered the tariff for husked rice from 20 percent to 1 percent. However, only imports made between March and August, when the market tends to be in short supply, could benefit from the lower tariff.
In 2000, Mexico included milled rice in the list of commodities subject to a "Customs Guarantee Account" system, which established a minimum import price for tariff calculation purposes. Under this system, rice imported below the predetermined floor price is subject to a deposit equivalent to duties applied on the price difference. Such a deposit is returned to the importer after six months.
Following negotiations at the WTO, Panama raised the level of bound tariffs on rice imports from 60 percent to 130 percent from October 1999 until December 2000. The bound rate will fall every year until it reaches 103 percent in 2004. Under its URAA commitments, the country also expanded the size of its preferential quota from 5 524 tonnes in 1998 to 6 048 tonnes in 1999 and 6 572 in 2000.
Faced with a surge in stocks and falling prices, Brazil introduced a ban on imports of rice from Argentina and Uruguay in April 2000, which was removed in June 2000. Instead, Brazil entered into an agreement with these two MERCOSUR members to restrict their exports to Brazil to 550 000 tonnes in 2000. Chile lowered the tariffs applied to rice products from 11 percent in 1998 to 10 percent in 1999 and 9 percent in 2000. The country's programme of tariff reduction involves further cuts of one percent per year until 2003, when the tariff will be kept at 6 percent.
Under the Andean Pact, movements of milled rice between Andean partner countries12 are free of duty. Imports from outside the region are authorised when supplies cannot be made available internally. Under the Andean Community price band system, imports of rice (excluding paddy) from third countries are subject to a variable import duty. This is determined on the basis of a floor and ceiling prices, set in April each year by the Andean Board of Directors, and a reference price, adjusted every two weeks by that Board.13 In 1998, the floor and ceiling prices of the rice price band were set at US$ 336 per tonne and US$ 390 per tonne, respectively. The floor price was raised to US$ 358 per tonne in 1999.
Colombia only releases import licenses when all domestic supplies have been sold at a pre-determined price. These licenses are issued to millers and processors in a fixed proportion of their local purchases, reportedly 1 tonne of import every 2.5 tonnes of domestic rice in 2000. Rice imports by Colombia are subject to ad-valorem duties of 20 percent for milled rice and 15 percent for paddy rice. As member of the Andean Community, however, the country has imposed additional import duties under the price band mechanism. Its operation resulted in a duty of US$ 73.4 per tonne in late 1998. The surcharge was much higher in August 1999 at some US$ 135.6 per tonne. It rose to US$ 143 per tonne in March 2000 and to US$ 162 in April 2001.
Like Colombia, Ecuador operates a complex trade import regime linked to the Andean Price Band System, based on an ad-valorem tariff, a variable duty and a supplementary safeguard duty. For the past three years, the ad-valorem tariff was kept at 20 percent, but the rice variable duty increased substantially, from 1 percent in 1998 to 26 percent in 1999 and 40 percent in 2000. In addition, the county imposed a safeguard duty, which rose from 5 percent in 1998 to 10 percent in both 1999 and 2000. As a result of these measures, the overall import duty rose from 26 percent in 1998 to 56 percent in 1999 and to 73 percent in 2000, remaining however within the bound URAA ceiling.
Following the tariffication of rice trade barriers in 1998, Japan renounced to apply the URAA provision on special treatment in respect of rice. This had the effect of slowing down the opening of the domestic market from the original 0.8 percent of the base-year consumption to 0.4 percent. As a result, the duty free import quota expanded from 644 000 tonnes in 1999 to 682 000 tonnes in 2000. In parallel, the out-of-quota import tariff was reduced from Yen 351.17 per kilo (US$ 2 943 per tonne) in April 1999, to Yen 341 per kilo (US$ 3 334 per tonne) in April 2000.14
Based on the United States/EC Blair House Accord, which was embodied in the EC's URAA commitments, imports of husked and milled rice into the Community have been subject to a variable levy since 1995, while paddy rice and brokens have been applied fixed duties within the URAA bound limits (Table I-10). The variable levy on milled and husked rice, which account for the bulk of EC's rice imports, are based on the difference between an external reference price and a ceiling derived from the prevailing intervention price. This system prevents the duty-paid import price15 to exceed the effective buying-in intervention price by more than 80 percent for husked Indica rice, 88 percent for husked Japonica rice; 163 percent for milled Indica rice; and 167 percent for milled Japonica rice. Its application has resulted in a fall in the variable levies imposed on husked and milled rice imports in the last three years, partly reflecting the drop in the intervention price over the period. For instance, the duty applied on husked Indica rice imported from third countries (excluding imports entering under preferential access schemes) fell from of Euro 235.9 (US$ 266.05) per tonne at the beginning of the 1998/99 season,16 to Euro 207.76 (US$ 220.50) per tonne in 1999/2000. It dropped to Euro 203.83 (US$ 181.06) per tonne in 2000/01, much less than in the previous two years, partly because the intervention price was no longer subject to reductions. Likewise, duties applied to the rice imports that entered the Community under preferential access quotas (accounting for some 40 percent of total shipments) fell over the period under review. Finally, duties applied to paddy and broken rice, which are subject to fixed rates, also fell in the past two years, in line with the provisions of the URAA.
Table I-10: URAA bound import duties on EC rice products (Euros per tonne)
Base |
1995/96 |
1996/97 |
1997/98 |
1998/99 |
1999/00 |
2000/01 | |
Paddy |
330 |
311 |
291 |
271 |
251 |
231 |
211 |
Husked |
413 |
388 |
363 |
339 |
314 |
289 |
264 |
Milled |
650 |
611 |
572 |
533 |
494 |
455 |
416 |
Broken |
200 |
188 |
176 |
164 |
152 |
140 |
128 |
Source: AgraEurope
The 2000 Commission rice reform proposal (see Box I-1) may have important implications for the estimation of the duties applied on imports of milled and husked rice, since the elimination of the official rice intervention price, would make the current system for the calculation of import levies on husked and milled rice unworkable. This could mean that the duty on those products would have to be based on the URAA bound tariffs, as is presently the case for paddy and broken rice. However, that change would have to be negotiated under Article XXVIII of GATT 1994 (Modification of Schedules) with interested WTO partners.
The EC Commission launched another proposal in September 2000, which was subsequently endorsed by the member countries in February 2001; to open up the European market to all commodities, except weapons, from 48 least developed countries.17 While this "Everything but Arms" (EBA) initiative gives unlimited and unrestricted access to most agricultural commodities produced in the beneficiary countries, rice was singled out, together with sugar, as one of the sensitive products subject to a transition period (Table I-11). Accordingly, only limited rice volumes would be allowed under the duty-free scheme until 2009.
Table I-11: EC duty-free rice import quotas under the EBA preferential access scheme (tonnes)
2001/02 |
2002/03 |
2003/04 |
2004/05 |
2005/06 |
2006/07 |
2007/08 |
2008/09 |
2 517 |
2 895 |
3 329 |
3 829 |
4 403 |
5 063 |
5 823 |
6 696 |
Source:EC
Since 1998, China has pursued an active rice export policy and large inventories held by public grain enterprises allowed the country to maintain a high level of shipments even in 2000, when the country faced a marked production shortfall and a shrinking world market.
In late 2000, India attempted to boost sales abroad by offering rice for export at FCI public tenders. However, no exports were reported under those tenders, due to the relatively high minimum sale prices. Moreover, counter to the tendency prevailing in other exporting countries, India lifted, in 2000, the tax refund system that had allowed rice exporters to get compensation for the local taxes paid on the procurement of basic inputs.
During the past two years, the Trading Corporation of Pakistan provided increased support to private rice exporters through the negotiation of government-to-government rice deals. In addition, it sponsored the establishment in 2000 of a quality review committee to give foreign customers guarantees over the quality of rice delivered by Pakistan.
Assistance to exporters in Thailand has usually been in the form of subsidised credits. In 2000, Baht 20 000 million (US$ 487 million) were earmarked for that purpose through an "Export Support Fund" operated by the EXIM Bank. In that same year, exporters were requested to purchase one million tonnes of domestic rice at the prevailing market prices and to keep them in storage pending a price recovery. In exchange, the Government provided interest-free credit to back the purchases and covered the storage costs.
Between 1998 and 2000, Vietnam continued to manage exports through a system of minimum export prices and quotas, which it allocated to authorised export enterprises, both public and private. In 1998, the Government established a quota of 4 million tonnes, of which 70 percent for export by provincial firms, and 30 percent by national firms. Subsequently, the quota was set at 3.9 million tonnes in 1999 and at 4.2 million tonnes in 2000, while the number of authorised export firms was raised from 19 to 41 in 1999 and to 52 in 2000. However, because of the weakness of the international market, actual exports fell considerably short of the Government target in 2000. Minimum export prices also had to be repeatedly adjusted downward to keep abreast of international price changes. As a means to sustain the market, the Government also gave credits to exporters to purchase one million tonnes of rice at a minimum price. In addition, the country has started a programme to establish paddy farms specifically oriented towards high quality rice production for export, in an attempt to bolster the country's competitiveness and gain improved access to the most remunerative markets.
In December 2000, following a bumper crop, Egypt lifted the ban on paddy rice exports. In the rest of Africa, exporters have seen barriers on exports between country members of the UEMOA lifted.
Uruguay's rice export assistance is limited to the restitution of indirect taxes paid during the production process. The restitution is calculated at 4.50 percent of the FOB export value for husked rice and 4.25 percent for most of the other rice products. Similar to Uruguay, Argentina limits its assistance to exporters to the reimbursement of taxes, ranging from 6.8 percent to 12 percent. Similarly, a 5 percent refund is given to rice exporters in Peru as restitution of ad-valorem tariffs paid on basic inputs.
In the United States, subsidies that used to be granted under the Export Enhancement Programmes have not been used since 1997, and export incentives are mostly conveyed through Export Credit Guarantee programmes (Table I-12). The volume of exports that benefited from the later fell from 499 thousand tonnes in 1998 to 192 thousand tonnes in 1999 and 225 thousand tonnes in 2000 (still provisional). Overall, about 25 percent of the United States' rice exports were shipped under food aid or credit guarantees programmes in 1999 and 19 percent in 2000, well above the share of 12 percent reached in 1996 and 1997, when world prices were relatively high.
Table I-12: United States rice export programmes
1996 |
1997 |
1998 |
1999 |
2000* | |
thousand tonnes | |||||
Food aid |
212 |
218 |
195 |
584 |
401 |
Credit Guarantee |
141 |
80 |
499 |
192 |
225 |
Total |
353 |
298 |
694 |
777 |
626 |
Share of total exports |
12% |
12% |
21% |
25% |
19% |
* Provisional
Source: USDA - Rice Situation and Outlook Yearbook, November 2000.
As governments of exporting countries intensified their efforts to secure rice sales, a large number of transactions were made under government-to-government agreements, often in the form of barter trade arrangements. Recourse to such arrangements were made between exporters, such as Myanmar, Pakistan, Thailand and Vietnam, and importers such as the Malaysia, Indonesia, the Islamic Republic of Iran, Iraq, the Philippines and Sri Lanka. Only one multi-year agreement was reported, which committed Egypt to supply Libya with some 100 000 tonnes of rice per year until 2003.
In September 2000, Thailand and Vietnam signed a memorandum of understanding, under which each country committed to contribute 100 000 tonnes of 25 percent broken rice to a pool, for sale at a minimum price of US$ 152 per tonne. The purpose of the scheme is to keep export prices from falling by preventing the two partner countries from undercutting each other's prices in international transactions. However, the quantities earmarked and the number of countries involved were too small to render it effective. While China and India have shown an interest in the initiative, they have not officially joined the agreement.
In the past two years, changes in rice production policies have been only partly consistent with the depressed price situation that prevailed in domestic and world markets. In fact, few countries took steps to cut production and most maintained expansionary rice production policies. Moreover, price support was raised in many countries, either through increases in the level of support prices or larger volumes of purchases by public procurement agencies. This behaviour denoted, in the case of many large rice producing /consuming countries, lingering concerns over a growing dependence on imports to meet domestic requirements, as well as the need to improve incomes of their farming population to
temper urbanisation pressure. Notwithstanding the intensification of public rice procurement purchases, developing countries were not always successful in protecting producers from the effects of low prices since they could not afford large-scale intervention programmes or safety nets. On the other hand, developed countries complied with their URAA obligations to cut price support and to implement production-limiting schemes. However, these measures were often ineffective in curbing excess production because of strong gains in yields and the large compensatory payments made to producers, which have tended to offset the effects of falling prices.
The review of the period points to a growing use of indirect forms of assistance to production. More specifically, governments intensified their contributions to research, extension and investment in infrastructure. Subsidies to insurance programmes also appear to have made inroads as an instrument of support to farmers in both developed and developing countries.
The disengagement of the public sector from direct rice production and marketing activities, a process that was initiated more than one decade ago, appears to have triggered contrasting responses across regions. In LAC, there is evidence that producer organizations have taken over important functions previously under the responsibility of state bodies, especially input distribution, extension and even research. On the contrary, in many countries in Africa, the private sector appears to have failed to replace public commodity boards in the marketing of basic inputs and final products, credit supply, etc.
The number of governments exercising direct control over wholesale or retail prices continued to decline during the period reviewed. Moreover, income growth and low prices favoured a general shift by consumers towards better quality rice, which, in turn, is triggering production adjustment towards higher quality rice varieties and investment in milling and storage infrastructure. In addition, as low retail prices have eroded the benefits of special distribution programmes, several governments took advantage of that favourable environment to mitigate the burden of those programmes on public finances, by raising selling prices or narrowing public distribution programmes. In this connection, the pressure has mounted, either internally or from international financing organizations, to re-examine the functions of state trading agencies in rice procurement, domestic marketing and international trade, possibly with the view to downsizing their activities and sharing some of their responsibilities with the private sector. While large intervention purchases boosted the volume of public stocks, the slide of market prices encouraged some governments to scale back publicly held inventories in an attempt to reduce financial costs and to overcome storage space problems. Nonetheless, various countries continued to maintain minimum rice reserves.
Concerns over the environment appear to have gained importance in a number of developing countries facing problems of soil erosion, salinity or desertification. The measures introduced to address those problems might denote a more balanced and sustainable approach in the pursuance of food security objectives in the longer run.
As regards international trade, WTO member countries have generally complied with their URAA obligations to open up their rice markets through preferential tariff quotas and to reduce export subsidies. Moreover, the URAA was effective in preventing several countries from discharging their rice surpluses onto world markets at below domestic prices. While a few countries have made wide use of export credits to boost exports; the extent to which they have provided an implicit subsidy to exporters is still subject to controversy. The URAA provisions on market access did not impede widespread tariff hikes, mostly because the bound tariffs were set high enough to give governments ample margin for variation.
Against this background, several recent policy developments deserve particular attention, since they might have potential implications for the future of the world rice economy:
1 International trade in rice accounts for only about 4 percent of global production , compared with 12 percent for maize and 18 percent for wheat.
2 For more details, see Follow-up to the Guidelines for National and International Action on Rice in 1996-99, CCP:RI 99/4.
3 To be reduced to 50 000 hectares, in case of crop failure.
4 Farmers are not obliged to sell to the Government agencies but often do so, as market prices do not generally exceed the support level. However, procurement agencies get the bulk of their supplies directly from millers, who must sell to these agencies a share of their production, ranging from 50 percent in Andhra Pradesh to 75 percent in Punjab and Haryana, at an established "Levy price". This price, which varies from state to state, is linked to the level of support prices and milling costs. The rice procured is then distributed through the PDS.
5 Includes fine and super fine rice types.
6 This quantity can be taken either in the form of rice or wheat.
7 From 16.5 million tonnes in 1994 to a record 27.5 million tonnes in 1998 and to 22.2 million tonnes in 2000.
8 China usually exports rice of medium to low quality, while importing high quality fragrant rice.
9 UEMOA members are Benin, Burkina Faso, Cote d'Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo.
10 In Senegal, the trigger price was reported to be a weighted average of the international price (30 percent) and domestic production costs (70 percent).
11 Except for rice products falling under the HS code 1904 -90- 90, which were subject to a 15 percent tariff.
12 Bolivia, Colombia, Ecuador, Peru and Venezuela.
13 If the reference price falls between the floor and ceiling prices, the variable duty is calculated at 20 percent of the reference price, independently of the true value of the import. If the reference price falls below the floor price, the variable duty is calculated at 20 percent of the floor price plus the difference between the reference and the floor prices. When the reference price exceeds the ceiling price, the surcharge is set at 20 percent of the ceiling price, minus the difference between the reference and the ceiling prices.
14 Based on an exchange rate of 119.33 Yen per US$ on 1 April 1999 and of 102.28 Yen per US$ on 1 April 2000.
15 Based on five, reference standard rice c.a.f. prices, loose, EC ports.
16 The rice season in the EC runs from 1 September to 31 August.
17 All ACPs, plus Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Maldives, Mauritania, Myanmar, Nepal and Yemen.
18 The chances for success are highly dependent on the share of the rice market accounted for by exporters participating in the scheme, the elasticity of world import demand and the elasticity of supply in non-member countries.
