Agricultural Development Economics Division (ESA)Food and Agriculture Organization of the United Nations

National rice policies in Asia

David DaweAgricultural Development Economics Division and Regional Office for Asia

and the Pacific, FAO

Bangkok, Thailand, 28 November 2013

Bangkok, Thailand 28 November 2013 2Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Some key objectives of rice policies

Farmer income

Consumer welfare

Price stability

Self-sufficiency

Environment preservation

Bangkok, Thailand 28 November 2013 3Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

“Weights” for key objectives of rice policy

Different countries have different objectives

Bangkok, Thailand 28 November 2013 4Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Some key determinants of rice policy objectives

Level of economic development

Trade status (exporter or importer)

Country size (China, India)

Bangkok, Thailand 28 November 2013 5Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Some key types of rice policies

Level of stocks

Trade controls

Bangkok, Thailand 28 November 2013 6Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Different purposes for holding stocks

Working

Emergency

Buffer (price stabilization)

International stocks

Level of stocks

Bangkok, Thailand 28 November 2013 7Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Advantages and disadvantages

Enhanced food security (e.g. food for work, disaster relief, protection against domestic production shocks, world price spikes and delays in arrival of imports)

Interest costs, quality deterioration

Level of stocks

Bangkok, Thailand 28 November 2013 8Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Different objectives of trade controls

Change the average level of prices

Change the volatility of prices

But any instruments used to affect one will usually affect the other as well

Trade controls

Bangkok, Thailand 28 November 2013 9Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Advantages and disadvantages

Less exposure to world markets, greater income for farmers, increased incentives for raising productivity

More poverty (especially in importers), worse nutrition, impede crop diversification, higher wages that reduce industrial competitiveness, more wheat imports, efficiency losses

Higher prices/self-sufficiency

Bangkok, Thailand 28 November 2013 10Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Advantages and disadvantages

Greater macro and political stability, lower likelihood of farmers and poor consumers falling into poverty traps

Can be expensive to operate, especially if government procurement is a large share of domestic production

Price stabilization

Bangkok, Thailand 28 November 2013 11Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Different instruments to control trade

Laissez-faire, or free market

Control of trade using tariffs (P)

Control of trade using quantitative restrictions (Q)

Trade controls

Bangkok, Thailand 28 November 2013 12Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Advantages and disadvantages of free market policies

Greater short-run economic efficiency

Loss of control over a key political variable (the price of rice), potentially greater economic instability

Trade controls

Bangkok, Thailand 28 November 2013 13Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Advantages and disadvantages of tariff-based policies

Potential for less uncertainty for traders, consumers & producers (especially if a schedule is used)

Feeling of less control, tariff schedules are illegal under WTO

Trade controls

Bangkok, Thailand 28 November 2013 14Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Advantages and disadvantages of policies that control quantities

Feeling of greater direct control

Greater uncertainty for private economic actors, prone to government policy errors

Trade controls

Bangkok, Thailand 28 November 2013 15Regional Office for Asia and the Pacific

Food and Agriculture Organization of the United Nations

Agricultural Development Economics Division (ESA)

Thank you for your kind attention