Rice Trade Policies and Their Implications for Food Security

There is a strong linkage between the behavior of the rice market and the state of food security in many regions around the world, particularly in Asia, as made evident in the 2007-08 commodity crisis. Rice is a staple for the majority of the population in Asia, where roughly 60% of the close to one billion undernourished people live (FAO, 2010). As Timmer (2010) states, “it is impossible to improve food security in the short run or long run without providing adequate supplies of rice that are accessible to the poor” (p. 2). The rice crisis of 2007-08 showed the crucial role of export and import policies on the behavior of the rice market and its consequences for price stability and food security. Market fundamentals could only explain a minimal part of the skyrocketing increase in rice prices observed (Dawe, 2010). The overarching objective of this study is to assess the impact of international rice trade policies on the patterns of production, consumption, trade, and prices, from an ex-post and ex-ante perspective, and analyze the implications of these policies from a food-security point of view. The RICEFLOW model (Durand-Morat and Wailes, 2010) is used for the assessment. RICEFLOW is a spatial partial equilibrium model of the global rice economy in which the behavior of producers and consumers are specified according to neoclassical economic theory (profit and utility maximizers, respectively). Domestic production and imports are specified as imperfect substitutes following Armington (1969). The model is calibrated to calendar year 2008, the latest available year for which the RICEFLOW database is available. The 2008 RICEFLOW database is disaggregated into 65 country/regions, including the largest producers and traders of rice, and 9 rice commodities defined on two dimensions, (1) milling degrees (paddy, brown, and milled), and (2) type (long grain, medium & short grain, and fragrant). Given the crucial importance of the Armington elasticities and the lack of good estimates on these parameters, systematic sensitivity analysis is conducted on the best available estimates to generate stochastic distributions of the endogenous variables with respect to these behavioral parameters. Results are decomposed in two dimensions, namely, (1) trade policy groups, and (2) countries, to obtain a better idea of the partial effect of policies and or countries applying them. Achieving food security implies guaranteeing access (physical availability and affordability) to safe and nutritious food to the entire population. Improving food security is the key goal of the World Food Summit of 1996 and the first Millennium Development Goal. Food security assessments have traditionally been done either at the macro level (market stability) or micro level (household access). Although the methodology used in this study constrains us to focus on the macro level, it can contribute to an improved understanding of trade policy for regional and global rice supply and, thus, for improved market stability.