CCP:GR-RI/04/3

Table of Contents

I. INTRODUCTION

II. PRODUCTION POLICIES (GUIDELINES B (i) – B (iv))

A. RICE EXPORTING COUNTRIES

B. RICE IMPORTING COUNTRIES

III. TRADE POLICIES (GUIDELINES C (i) to C (viii))

A. EXPORT MEASURES

B. IMPORT MEASURES

IV. INTERNATIONAL FOOD AID POLICIES (GUIDELINES C (i) to C (viii))

V. CONSUMPTION (GUIDELINES A (ii) to A (viii))

VI. RICE RESERVES (GUIDELINES E (i) to E (iv))

VII. CONCLUSIONS

I. INTRODUCTION

1. This paper examines the principal developments in government rice policies since the previous IGG Session in 2001, to assess progress made in complying with the FAO Guidelines for National and International Action on Rice. The information has been drawn from various sources, including replies from governments to the Secretariat’s questionnaire¹.

2. Since 2001, developing countries have proceeded with the implementation of their Uruguay Round Agreement (URA) commitments, while developed countries already completed theirs in 2000. This did not prevent governments from further reforming their rice polices, under the prospect of a new Round of Multilateral Trade Negotiations.

II. PRODUCTION POLICIES
(Guidelines B (i) – B (iv))

3. In 2001 and 2002, global paddy production fell but a partial recovery was witnessed in 2003. Despite the slide in production, international prices remained weak and only reverted to a positive path by mid-2003. Such a depressed market environment provided the backdrop of national rice production policies, encouraging some countries to intensify the use of market stabilization measures, but also to reorientate their strategies from quantitative to qualitative production objectives.

A. RICE EXPORTING COUNTRIES

4. Among the major exporters, Thailand launched in 2001 a new five-year national rice strategy (2002-2006), which earmarked Baht 90 billion (US$ 2 billion) for the construction of silos, research, development and promotion and market price stabilization². As for the latter, the rice market weakness prompted large-scale intervention by the Government to sustain prices through acquisitions of paddy under a mortgage scheme, which guarantees a minimum price level to producers. Quantities of the main crop mortgaged by farmers rose from 1.6 million tonnes in 2001 to over 6 million tonnes in 2002. For 2003, the Government announced provisions for up to 9 million tonnes of paddy purchases. However, support prices associated with the programme have remained unchanged since 2000 (Annex Table I).

5. Rice procured by the authorities in India reached a peak during the 2001/02 marketing season. In February 2001, public agencies were exempted from procuring all the rice offered for sale by farmers at minimum support price levels. This obligation was reinstated by India’s Supreme Court in August 2003, a move that prompted the Government to propose in September 2003 the introduction of a farmer crop insurance scheme to cover the difference between the minimum support and market price levels. Despite concerns over bulging grain inventories, the Federal Government kept support prices unchanged in 2002 and raised them in 2003. However, changes in relative support prices in 2003 tended to encourage rice producers to diversify, in particular towards oilseeds. The Government also increased the controlled price of urea by 5 percent in 2002, in an attempt to reduce its huge outlays on fertilizer subsidies.

6. Viet Nam resorted to price stabilization measures in 2001 and in 2003, through state-controlled exporting firms, which bought paddy from farmers at agreed minimum price levels. In 2003, about VND 1170 billion (US$ 76 million) in preferential loans were earmarked for that purpose. In addition, in 2002, producers were encouraged to establish links with processors and exporters, through delivery contracts at pre-established prices. Aside from market stabilization, the Government has engaged in a rice sector development strategy aimed at enhancing rice yields and quality. The intensification of production has relied on stabilizing the area under rice and on the development and promotion of new rice varieties, with the government prioritizing biotechnology.

7. Like India, China (mainland) has been confronted with a very large cereal stock overhang. The Government’s response lent itself to sharp cuts in paddy production, by first removing support (“protective”) prices for the early rice crop in southern states and, then, by lowering them for the single (main) and late rice crops. The move coincided with a relaxation of mandatory delivery quotas allowing producers to adjust their crop patterns in function of market signals, with the ultimate purpose of raising farmers’ incomes but also the quality of the rice produced. The reduction of price supports is consistent with a deepening of cereal policy reforms currently in progress in China, which would extend to the whole country a series of experimental reforms conducted since 2001. Under the new policy stance, rice farmers would no longer be subject to mandatory rice production and quota purchase plans and would be free to take their own decisions regarding production³.

8. In April 2003, Myanmar announced reforms to its national domestic rice policy, which basically eliminates production quotas and government engagement in rice procurement. Until then and for the past 40 years, farmers had to comply with compulsory quota deliveries to the Myanmar Agriculture Produce Trading (MAPT). In recent years, the delivery quota was set at 12 basket⁴ per acre (some 620 kg per hectare), or about 30 percent of output. In 2002, the official procurement price, at 320 kyats per basket, represented only 15 percent of the reported market price, entailing a heavy tax for producers. The new rice policy allows farmers to sell all their rice on the market place. On the other hand, the government remains committed to production expansion, through the reclamation of new land and multiple cropping.

9. Pakistan ceased to set rice support prices in 2003. Already in recent years, they were announced only for indicative purpose. Increased finance was provided for the installation of tube wells and usage of certified seeds, which rose by 75 percent in 2003. This contributed to a 5 percent rise in yields, but also to a shift towards higher quality rice cultivation, with a substitution from IRRI to Basmati rice varieties.

10. The United States passed “The Farm Security and Rural Investment Act of 2002”, which establishes the bases of federal farm programmes from 2002 to 2007. Under the new Act, rice producers are eligible to marketing loan benefits, direct payments and counter-cyclical payments. The rice loan rate, on which marketing loan benefits are calculated, remained at US$ 143.3 per tonne but the rice direct payment rate was raised from US$ 45.2 to US$ 51.8 per tonne (Annex Table II). In addition, the Act re-introduced target prices, at US$ 231.5 per tonne, for the calculation of counter-cyclical payments (CCPs), whenever the ‘effective” producer price (inclusive of direct payment) fails to reach the set target. As market prices were below the loan rates, about US$ 72 per tonne were paid as marketing loan benefits to producers in 2001/02 and 2002/03. In addition, producers received US$ 62.2 and US$ 52.6 per tonne supplementary emergency payments in 2000/01 and 2001/02, respectively, and US$ 36.4 per tonne as counter-cyclical payments in 2002/03.

11. Among the other major rice exporters, Egypt made further inroads in developing and distributing fast-growing, water-saving rice varieties, which contributed to a further rise in national paddy yields to world record levels. In July 2003, Uruguay established a fund financed through a 5 percent tax on all rice exports, to help indebted rice producers to pay their loan arrears.

B. RICE IMPORTING COUNTRIES

12. Despite low international prices, the most important rice importers, especially those still facing a rapid expansion in domestic demand, maintained their commitments to achieve rice self-sufficiency. With that purpose, Bangladesh continued to put emphasis on irrigation to promote paddy production, but also appeared to pay growing attention to rainfed rice cultivation, for instance through the development and diffusion of drought-resistant high-yielding varieties. Producer support prices were raised slightly in 2000/01 and 2002/03 while quantities procured remained of the order of 700 000 – 800 000 tonnes. Under its latest agricultural development plan, Indonesia intends to boost paddy production through an intensification and extensification programmes, the latter focusing on an expansion of cultivation in Kalimantan and Sumatra. The expansionary stance was reflected in a large increase in support prices in 2001 and 2003. Under the 2001-2005 Development Plan, the Islamic Republic of Iran decided to cut State intervention in agriculture. However, droughts in 1999-2001 prompted the Government to heighten its support through large public investments in water management and irrigation infrastructure and to raise paddy support prices to very high levels for international standards. The Philippines remains firmly committed to achieving rice self-sufficiency in the next few years and continued to invest in the sector, especially through the promotion of hybrid rice cultivation. A 50 percent subsidy on certified seeds and fertilizers was granted for that purpose in 2003, with the scheme covering 540 000 hectares of irrigated land, or about 13 percent of the total area. Support prices, on the other hand, have been kept unchanged since 2000.

13. Under the 1998-2010 National Agricultural Policy programme, Malaysia adopted a rice development strategy geared mainly to enhancing domestic rice competitiveness. Accordingly, the Government phased out some unproductive paddy areas and designated eight special zones, or “granaries” in Peninsular Malaysia. The country is also set to identify suitable areas in Sabah and Sarawak, in East Malaysia, for large-scale commercial paddy production by the private sector. Meanwhile, producers have continued to benefit from high fertilizer subsidies and minimum producer prices, although these have been unchanged since 1998.

14. Faced with large rice inventories and in preparation of the new round of multilateral trade negotiations, the Government of the Republic of Korea released in April 2002 a “Comprehensive Plan for the Development of the Rice Industry” for the stabilization of rice supply and demand. The Plan envisaged to cut the area under rice by 166 000 hectares in 2002, rising to 212 000 hectares by 2005. In addition, yields are to be curtailed by requiring that farmers diminish nitrogen applications. At the same time, guaranteed producer prices were raised by 4 percent in 2001. They were left unchanged in 2002 and, for the first time, lowered in 2003. As of 2002, state procurement was restricted to high quality rice, following the setting of new standards for government purchasing programmes. Rice producers started to receive direct payments of Won 200 000-250 000 (US$ 150 - 195) per hectare in 2001 and twice that level in 2002.

15. Similarly, Japan’s current rice policies are directed at curbing excess paddy production while improving the competitiveness of the sector, for instance by encouraging a consolidation of small farms into larger units, and at protecting producers from large income variations. Since 1998, the Government only buys rice for its stock reserves rather than for market price stabilization. However, producers have benefited from the Rice Farming Income Stabilization Programme⁵, which guaranteed them 80 percent compensation for price shortfalls below a reference level. Such a reference price was originally calculated as a moving average of the previous three years, but since 2002, it has been based on the previous seven years⁶. To qualify for price compensation on their current level of production, farmers must adhere to the Production Adjustment Programme, which obliges them to divert part of their rice area to other crops. In both 2001 and 2002, the national target for diversion of paddy land was set at 1.01 million hectares, or 40 percent of the total paddy area, and further raised to 1.06 million hectares in 2003. In addition to price compensation, the land diversion programme also gives farmers the right to receive a per hectare “diversion payment”, which varies according to the alternative use given to the land, in addition to the revenue obtained from selling the produce from the diverted area.

16. In Africa, many countries, especially in Western Africa, concentrated their efforts on expanding rice cultivation in lowlands and inland valleys, but several of them, e.g. Mali, Mauritania, and Senegal, also invested in the rehabilitation of irrigation schemes and made attempts to shift responsibility for their management to farmers. In addition, Governments, especially in Cote D’Ivoire, Guinea, Nigeria and Sierra Leone promoted the adoption of the high-yielding Nerica rainfed rice variety, developed by the African Rice Centre (WARDA), as a means to raise self-sufficiency in rice. With that objective, Nigeria also launched in August 2002 a “President’s Rice Initiative” to enhance rice production and processing, based to a large extent on increased border protection. In general, there was little specific support to the sector in the region in the past two years and a general drive towards privatization largely dominated.

17. In Latin America and the Caribbean, several countries focused on overcoming land tenure problems. For instance, the Dominican Republic made progress in implementing agrarian reform, with the provision of legal ownership titles to the beneficiaries, to facilitate the development of a real estate market and to improve producer access to credit and other services. Guatemala implemented a plan for land registry and territory codification. It also launched a campaign to reduce agricultural producer vulnerability through an insurance programme and sales on market futures. Panama also proceeded with a land proprietorship programme and granted subsidized loans to assist farmers affected by adverse weather conditions. The country also approved an irrigation plan to construct four large projects. Paddy producers in Brazil benefited from a number of institutional programmes, including pledging schemes, which provide a floor price to producers, albeit at low levels. Costa Rica raised the guaranteed producer price by 6 percent in 2000, but has left them unchanged since then. Venezuela launched a new Agricultural Development Plan in 2000, which designates rice as a strategic product subject to an ambitious production growth objective, as a means of curbing the country’s dependence on wheat imports. Several countries in the region, including the Dominican Republic, Colombia, Guatemala and Panama, continued to provide incentives to encourage local millers to buy domestic rice at an “agreed’ minimum price, either by covering the storage costs or through a “crop absorption” system, under which the granting of import licenses is conditional to purchasing paddy on the local market at pre-determined prices.

18. Under the Common Agriculture Policy (CAP) reform passed in June 2003, the European Union (EU) substantially weakened the scope for domestic intervention on the rice market, following a 50 percent cut in the intervention price to € 150 per tonne and a ceiling on intervention purchases introduced at 75 000 tonnes per season⁷. The reform, to be implemented at the beginning of the 2004/05 season, compensates farmers for the reductions in the intervention price and in National Base Areas through an increase in direct payments from € 52.65 to € 177.0 per tonne of paddy. Of these, € 102 per tonne are to be transferred in the form of a “single farm payment” based on historical (2000-2002) production rights and € 75 per tonne as crop-specific aid, subject to the national area ceilings and historical yields. The single farm payment will be introduced as of 1 January 2005, with the portion exceeding € 5000 subject to 2 percent annual reductions until 2013. Part of the proceeds will be re-directed to finance rural development activities under the “modulation” principle. The single farm payment will be linked to the respect of the environment, animal welfare and quality standards under the principle of “cross-compliance”.

Table 1: EU Rice Compensatory Payments

* Includes the single farm payment and crop specific aid.
Source: EU Commission

III. TRADE POLICIES
(GUIDELINES C (i) to C (viii))

A. EXPORT MEASURES

19. As competition for market share intensified, governments were active in finding new export opportunities and sought to enhance the quality of exports to reap higher prices. In 2002, trade in rice reached a record level, sustained by a large increase in shipments from India. The surge followed the country’s move, in November 2000, to allow exports from public stocks as a means to dispose of bulging rice piles held by the Food Corporation of India (FCI). FCI sale prices to exporters were lowered to the below-poverty-line subsidized retail levels as of mid-2001, which gave a decisive boost to exports. Sales for export from FCI stocks, however, were suspended in August 2003, following a large reduction in the size of rice inventories. Although FCI prices of rice for export have been subsequently raised, they have remained competitive, ⁸ enabling the country to position itself as the second largest rice supplier to the world market in 2002.

Table 2: India - FCI Rice^1/ Sale Prices for Export

^1/ Non-Basmati rice, 25 percent broken

20. India, together with several other exporters took legal steps to liberalize rice exports. In March 2002, under the new 2002-2007 Export/Import (EXIM) policy, the country lifted quantitative restrictions on the export of rice, including Basmati paddy rice. Similarly, in April 2001, b removed quantitative limits on exports and allowed all economic agents holding agricultural commodity trade licenses to engage in rice exports under the new Export-Import Management Mechanism. The Government of Myanmar also abolished its rice export monopoly and devolved the responsibility to the private sector. However, private traders exports remain subject to approval by a Myanmar Rice Trading Sub-Committee, (which also sets a minimum export price on a monthly basis) and to export licensing by the Directorate of Trade. By contrast, under China’s accession agreement with the WTO in December 2001, the Government retained its monopoly over rice exports, although it agreed to eliminate all export subsidies. These were used to some extent by Egypt in 2001, while Pakistan granted some freight subsidies in 2003. Vietnam also launched in 2001 an export bonus programme, which set a premium of VND 180 (US$ 0.012) for each dollar of export value. By contrast, Argentina introduced a 10 percent tax on rice (and other agricultural products) exports in March 2002, following the devaluation of the national currency.

21. Major exporters reacted to growing international competition and falling world prices by enhancing the quality of the rice exported to prop foreign exchange earnings. For instance, India’s Basmati rice exports became subject to advisory minimum prices under the aegis of the Export Development Authority (APEDA). Pakistan allowed the private sector to issue quality and grading specifications to ensure exports meet minimum standards. Thailand issued a regulation in September 2002 imposing a purity of either 80 percent or 92 percent on Hom Mali fragrant rice exports. Bolivia also undertook to update its norms and standards for rice as a measure to promote exports. A “code of practice” for basmati rice is currently being developed in the EU.

22. Governments of major rice exporting countries were often directly involved in seeking new export contracts. Thailand resorted to long term credits to promote government-to-government deals and clinched several counter trade agreements. In Pakistan, the Government struck deals with major importing countries on behalf of the private sector, while in Vietnam, the Government settled on several barter trade arrangements involving rice. In addition, a number of countries established offices, under the aegis of their governments, in potential growth markets, such as the Islamic Republic of Iran, the Russian Federation and Iraq. In addition, Thailand established a futures exchange for agricultural commodities in 2001, while India allowed rice to be traded on futures in the National Multi-Commodity Exchange (NMCE) at the end of 2003.

23. Among developed countries, the United States continued to abstain from paying direct export subsidies, while the EU reported to have exported 132 thousand tonnes with refunds, for an expenditure of € 32 million in 2000. The expenditure rose to € 39 million in 2001, but has been budgeted to be cut back to € 32 in 2002 and 2003. In Australia, the local Government of New South Wales, where most of the country’s rice is grown, decided in 2003 to extend until 2009 the monopoly on rice exports held by the Rice Marketing Board on behalf of the rice grower’s co-operatives.

24. An initiative was also launched by several major exporters to streamline international competition in rice by establishing an alliance to exchange information and possibly agreeing on an international reference price. In addition, bilateral and regional agreements gained momentum, especially after the failure of the WTO Doha Round.

B. IMPORT MEASURES

25. Global rice imports in the past three years remained high compared to the pre-1998 levels, reflecting production shortfalls but also the openness of trade regimes, especially in Africa. However, low international prices prompted several governments to raise border protection.

26. Under China’s accession agreement with the WTO in December 2001, tariffs on rice products were bound at 65 percent by the end of the implementation period, in 2004. However, the country granted a 1 percent duty preferential tariff quota for up to 5.3 million tonnes by 2004, half of which was reserved to private traders and the other half to COFCO, the food state trading enterprise. However, as of 2003, actual imports fell considerably short of the preferential access volumes.

Table 3: China's WTO Market Access Commitments for Rice

27. The Chinese Taiwan Province, which formally joined WTO on 1 January 2002, opted against "tariffying" its rice trade barriers, under the special treatment provision of WTO, and opened a 144 720 tonnes free-of-duty quota in husked rice equivalent in 2002. The SAR of Hong Kong announced the full liberalization of its rice trade regime as of 1 January 2003. The Philippines allowed producer groups and cooperatives to import up to 400 000 tonnes of rice In 2003, subject to some limitation on the timing of the deliveries and on individual shipments volume, thereby putting an end to the National Food Authority (NFA) quasi-monopoly over rice imports.

28. Except for the previous instances of progress, there was a tendency to use border protection, as a means to stabilize domestic prices. For instance, Bangladesh raised tariffs from 5 percent to 25 percent in 2001 and introduced a regulatory tax on imports. The country also resorted to an import ban on rice from India, through all but one entry point. Although Indonesia refrained from increasing applied specific import duties, it resorted to higher non-tariff protection, with the introduction of stiffer inspection requirements in 2001 and a ban on imports to Java in 2002. Sri Lanka also prohibited imports in mid-2001, although it authorized some duty-free or reduced-tariff deliveries by the end of the year. Early in 2002, it converted the 35 percent ad valorem duty into a specific duty of Rupee 7 000 (US$ 75) per tonne. Tariffs on rice were also raised in Turkey and Vietnam. In Africa, Nigeria brought them from 50 percent to 75 percent in January 2001 and further lifted them to 100 percent in 2002. In 2003, the country’s imports were subject to an additional 10 percent special rice development duty. In addition, to counter under-invoicing practices, the Government imposed a minimum CIF value for calculation of the duty on rice imports, at US $ 205 per tonne for Indian rice and US $ 230 per tonne for rice from other origins.

29. Under the Mercosur Common External Tariff, Brazil cut duties on rice imports from 12.5 percent to 11.5 percent in 2002, but introduced new phytosanitary requirements on the imports of rice and other agricultural products, obliging non-Mercosur suppliers to submit pest risk assessments. In 2003, import taxes were temporarily cut to 4 percent, for the last quarter of the year. Under the Andean Pact, Bolivia, Colombia, Ecuador, Peru and Venezuela implemented a price band mechanism for calculation of duties on imports from outside of the Andean Community, which is based on floor and ceiling prices set annually and a reference price updated every two weeks⁹. The system resulted in a decline in the duties applied between 2001 and 2003. Under the Andean Pact, Colombia maintained a safeguard that has limited rice imports from Ecuador since 2000. WTO price and emergency action safeguards were invoked by Costa Rica on husked rice imports which raised the tariffs applied in 2001 and 2002. In addition, the country increased the phytosanitary charge on rice imports.

Table 4: Andean Community Price Band Mechanism – Rice (10% broken)

Source: Andean Community General Secretariat; SICA-BM/MAG-Ecuador

30. Under NAFTA, imports by Mexico from the United States became free of duty in 2003. However, a NAFTA ruling allowed Mexico to impose a 10 percent anti-dumping compensatory duty against a number of US exporting firms in 2003. Progress was made in the rest of the region in the implementation of the WTO market access commitments, resulting in lower bound tariffs and increased preferential market access.

31. The 2003 EU Rice reform did not alter the fundamentals of the Union’s rice import regime. Rice imports remain subject to variable levies, based on the Margin of Preference System, which is tied to the, now much lower, intervention price (Annex Table III). As a result, the duties are expected to fall substantially¹⁰. This will also negatively affect the value of the tariff concessions to third countries, including those granted to ACP countries, to India and Pakistan on Basmati rice, Bangladesh and Egypt. More important, it will considerably erode the benefits of preferential access under the Everything-But-Arms programme (EBA).

Table 5: EC Rice Concessions under the EBA Preferential Access Scheme

Source: EU Commission

32. Since 1999, Japan has implemented a tariff system on imported rice, with the duty bound at Yen 341.0 per kg (about US$ 3 000 per tonne). As a result, rice is almost exclusively imported under the (free-of-duty) quota of 770 000 tonnes (husked basis) by the Food Agency, the only entity eligible to import under the quota. Over 80 percent of this is filled by the Agency directly for government stocking purposes under the “Ordinary Market Access’ and the rest allocated through auctions to private traders under the “Simultaneous-Buy-Sell” (SBS) system, subject to the payment of a mark-up to the Food Agency that cannot exceed 292 yen/kg. In 2001, the volume imported under the SBS was reduced by 20 000 tonnes to 100 000 tonnes, the first cut since 1995, and again in 2002 to 50 067 tonnes, partly due to food safety concerns. Japan invoked the volume-based safeguard for pellets of rice from 1 July 2001 to 31 March 2002, and the price-based safeguard on milled rice on 31 May 2002

IV. INTERNATIONAL FOOD AID POLICIES
(GUIDELINES C (i) to C (viii))

33. Shipments of rice food aid rose from 1.2 million to 1.4 million tonnes between 2000 and 2002 (Annex Table IV). A novel feature during the period was the growing importance of a number of developing countries, in particular China and the Republic of Korea, as donors of rice to the international community. In 2001, large donations by Japan compensated for reductions by the EU, the Republic of Korea and the United States. In 2002, the opposite movements took place as a sharp drop in Japan’s food aid was more than offset by increases by all the other major donors. Food aid accounted for about 5 percent of total trade over the three year period.

34. The main beneficiary over the period was the Democratic Republic of Korea, which received, on average, close to 500 000 tonnes of rice food aid. Indonesia was the second largest recipient, followed by the Philippines, Uzbekistan and Mozambique.

35. Rice food aid provided through triangular transactions rose in 2001 but dropped in 2002 to less than 100 000 tonnes (Annex Table IV). In 2001, the Netherlands and Germany were the greatest financing sources for such transactions, accounting for close to half of the total. In 2002, the same share was accounted for by Australia and the Netherlands.

V. CONSUMPTION (GUIDELINES A (ii) to A (viii))

36. Rice is one of the few food commodities still subject to government wholesale or retail price controls and to public distribution under poverty alleviation programmes. Public distribution of rice is still running in countries such as Bangladesh, India, Indonesia, Malaysia and the Philippines, and some also keep rice retail prices under control. Since 2001, a tendency to better target the programmes to the poor has prevailed, as a means to alleviate the financial burden born by distribution agencies. For instance, in Bangladesh, the share of rice delivered through the monetized channel rose. In Indonesia, Bulog, the state trading agency only kept the responsibility of supplying rice to the vulnerable and special population groups. In 2003, Bulog supplied about 1.8 million tonnes at highly subsidized prices for distribution by the local authorities under the "rice for the poor programme”.

37. India has maintained the level of prices at which it sells rice to the “below-poverty-line” population group since 2001 but lowered the price to the “above-the-poverty line” consumers in July 2001 and in April 2002 and raised it back in July 2002, once stocks were reduced. Malaysia continued to impose a ceiling on retail rice prices but lifted them for the higher qualities in 2001. Japan reduced the price at which the Food Agency sells to wholesalers in 2001 and 2002 and continued its supply disposal programme through the removal of old rice from stocks, for use as feed. Under the “Comprehensive Plan for the Development of the Rice Industry”, the Republic of Korea launched in 2002 a series of initiatives to stimulate domestic rice utilization, through a “Rice for Breakfast” campaign, rice for school lunches, distribution to military and public institutions and the establishment of a food stamp programme for vulnerable groups. In addition, it raised the volume of rice for processing into starch and alcohol. Similarly, the EU released large rice volumes from intervention for feed in 2002 and 2003, under drought relief measures.

38. In Costa Rica and St Lucia, where rice is still subject to wholesale and retail price controls, the price ceilings were lowered. Venezuela undertook to promote rice consumption in the past two years, for instance by requiring rice to be blended with maize flour for government food programmes and through public schools campaigns.

VI. RICE RESERVES (GUIDELINES E (i) to E (iv))

39. World rice stocks at the end of the 2003/04 marketing seasons closed at their lowest level in the 1990s. This resulted in a deterioration of the global stocks-to-projected consumption ratio from 37 percent in 2001 to 25 percent in 2003. The bulk of the reduction was concentrated in the two major rice producers, namely China and India. In the former, the reduction was mostly associated with a cut in production and with some disposal of old rice for feed, while in the latter it was mainly the result of large export shipments.

40. Although some governments attempted to shift the responsibility of holding rice stocks to the private sector, major rice consuming countries maintained a mandatory minimum level of rice for food security reserves, including China, the Philippines, Malaysia and Indonesia. At the regional level, the Association of South East Asian Nations (Asean) reiterated in October 2003 the need to set up a rice reserve for the region, at some 85 000 tonnes, for food emergencies.

41. Rice contributions to the International Emergency Food Reserve (IEFR), operated by the World Food Programme (WFP), rose to a record of 675.4 thousand tonnes in 2000. but fell drastically thereafter, reaching 47.5 thousand tonnes in 2002, well below the 500 000 tonnes recommended minimum (Guideline E (iii)). Financial contributions to the programme dropped accordingly. Contributions to the Protracted Relief and Recovery Operations (PRRO), also operated by the World Food Programme, followed a similar path, although less marked, with a drop in the in-kind deliveries from 192.4 thousand tonnes in 2000 to 123.2 in 2002 (Annex Table V).

VII. CONCLUSIONS

42. Since 2001, governments have implemented less expansionary production policies, a stance which coincided with a move towards better quality rice cultivation at the expense of quantity, especially in major exporting countries in Asia. However, major importing countries remained firmly committed to self-sufficiency objectives and kept assistance to the sector high.

43. Concerns over the impact of lingering low prices on producers prompted certain governments to activate large procurement schemes and to adopt debt alleviation programmes. However, direct price support to producers was minimal in Africa and in Latin America and the Caribbean, where market stabilization was mostly conducted through border measures. Although developing countries had large scope for increasing assistance to rice producers under the WTO Agreement on Agriculture de minimis provision, most of them were constrained by a lack of budgetary resources. The situation was different for the developed and middle-income developing countries, some of which adopted production-cutting measures, while raising compensatory or emergency payments to farmers.

44. In the sphere of rice trade, the private sector was allowed to play a more active role. The prevalence of low international prices, however, encouraged several importing countries to raise tariff and non-tariff barriers. Recourse to safeguard clauses appears to have increased in 2001 and 2002, with some countries also resorting to phytosanitary measures. On the other hand, greater assistance was provided to rice exporters as competition for markets stiffened.

45. Where rice remained subject to retail price controls, distribution at subsidized prices was often more narrowly targeted to the poor and special population groups. The responsibility of state enterprises in rice marketing and distribution also diminished.

46. Faced with mounting rice reserves, some governments were under pressure to reduce the size of publicly held stocks but strategies for cutting rice inventories differed. For instance, China largely “endogenized” the process, with the Government enacting on production-cutting measures. This contrasted with the strategy adopted by India, which reduced its supply overhang by boosting exports, transmitting most of the burden of adjustment onto the world market..

47. Several of the policy developments since 2001 have been consistent with the Guidelines for National and International Action on Rice, in particular:

• More environment-friendly rice varieties and production technologies have been developed and promoted by governments
• A number of large producing countries facing surpluses have adopted production-control and consumption-enhancing measures
• Increased assistance to producers has been provided through direct income assistance and less through the more trade-distorting price incentives
• Governments have sponsored alternative instruments to stabilize producer incomes, including insurance schemes and futures exchanges.
• Several countries lifted or softened export restrictions on rice
• Food aid flows in rice have remained high and increased preferential access to low-income developing countries has been granted by some developed countries

48. However, some policy measures have given rise to concern, in particular:

• The shift from price to direct income support to producers, while in line with WTO principles, is increasingly viewed as a source of trade distortion. It also erodes the benefits granted under preferential access schemes.
• Recourse to WTO exceptions for developing countries in the use of certain forms of subsidies have resulted in a surge of cheap rice supplies on world markets with negative impacts on international prices.
• Contributions to the WFP International Emergency Reserve failed to reach the 500 000 tonne recommended minimum in 2001 and 2002.
• The continued draw-down in world rice stocks, driven by downsizing policies in China and India, might have destabilizing effect on the world rice market.

49. In the light of the above, the Group might wish to:

• Recommend that increased multilateral and bilateral assistance be given to developing countries to raise paddy production (Guidelines A (ii) e), B (iv)) where economically and environmentally sustainable (Guideline F (ii)).
• Invite developed and middle-income countries to assess the overall impacts of their new rice policies, with the view to minimize trade distortions and the losses such policies might entail for trading partners with preferential access privileges (Guidelines A (i), A (ii) b)).
• Invite members of the IEFR to increase their in kind or monetary contributions to the reserve with the view to ensure timely and adequate rice availabilities for emergency food aid purpose.
• Encourage countries to supply timely information on market and policy developments with the purpose of improving transparency and enhance the Secretariat’s ability to conduct its global market analyses (Guidelines C (ii), C (v))

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¹ Document CCP: CCP:GR-RI - 04/3-Sup.1 contains the basic text of the Guidelines and Statistical Annexes

² Three-quarters of which to be granted in the form of loans

³ Tight restrictions in the conversion of basic farm land to non-agricultural uses still apply.

⁴ 1 basket of paddy equal to 20.9 kg

⁵ One fourth of the Stabilization Fund is financed through contributions by farmers, with the rest coming from the National Budget.

⁶ Excluding the highest and lowest prices.

⁷ For 2003, the ceiling was higher, at 100 000 tonnes

⁸ Although India is not entitled to use export subsidies on rice, it appears to have resorted to a WTO exception under Article 9 of the AoA, which allows developing countries to subsidize internal transportation and processing.

⁹ When the reference price falls between the floor and ceiling prices, imports are only subject to the common external tariff (CET). If the reference is lower than the floor price, the difference is added as an sucharge to the CET levy. If the reference price exceeds the ceiling price, the difference is sustracted from CET levy.

¹⁰ Payable duty on unhusked rice = (Intervention price x 1.80) – (Reference Price x 1.08)