Global Rice Trade Liberalisation: Implications from Some Alternative Scenarios

Like many other agricultural commodities, the international rice market is highly distorted because of excessive protective measures in both developed and developing countries. This paper examines the welfare and trade impacts of the global liberalisation of rice and agricultural trade on a number of key players in the world rice market along with the four South Asian countries namely, Bangladesh, India, Pakistan and Sri Lanka. Using the Global Trade Analysis Project (GTAP) general equilibrium modelling framework, six different sets of liberalisation scenarios are simulated here, which include: (1) complete liberalisation of rice trade alone in all countries; (2) complete liberalisation of the rice sector in developed countries only; (3) partial liberalisation of the rice trade in all countries; (4) complete liberalisation of the agricultural sector as a whole in all countries; (5) partial liberalisation of all agricultural commodities in all countries; and (6) complete removal of all export subsidies on rice only. Simulation results suggest regional import prices rise in the range 4-15 percent. The global rice trade increases significantly under the complete rice and agricultural trade liberalisation scenarios, with the aggregate global welfare gains reaching $20 billion and $50 billion, respectively. While partial liberalisations lead to some modest increase in world trade and welfare gains, the impact of the complete removal of export subsidies alone, as agreed in the recently held Hong Kong Ministerial Conference of the World Trade Organisation (WTO), is unlikely to have any discernible effects. The results clearly demonstrate the highly unequal nature of the global distribution of welfare gains. While countries like Bangladesh, a net food-importing South Asian LDC, stand to suffer from welfare losses in most cases, such countries as China, India, and Thailand are set to enjoy net welfare gains.