Rice Trade Issue Divides Countries

RICE, one of the world's most basic commodities, is caught up in the complex web of trade politics.A staple to billions, this starchy grain is among many agricultural products whose prices and trade volume are subject to the whims of national governments. Farm products have largely defied attempts by the Geneva-based General Agreement on Tariffs and Trade (GATT) to impose regulations. The international institution is charged with the fair regulation of world commerce. GATT's Trade Negotiating Committee, scheduled to meet at the end of this month, will once again try to tackle the debate over agriculture, which has been called the linchpin of a successful current round of world trade talks. Government subsidies and closed markets are at the heart of the GATT dispute over agriculture. While attention has centered on US consternation over the internal supports of the 12-nation European Community (EC), the problems are global in scale. Producers and consumers alike pay a high price for the trade distortions which result from unfair trade practices. Rice industry advocates point to huge disparities between various governments' support for rice production: US support is just over $200 per metric ton; Japan's is roughly $2,000 per ton; South Korea's is between $1,000 and $1,800; and the EC's runs from $400 to $600. Liberalizing import rules would mean that costly local production would give way to internationally competitive imports. Governments that spend a lot on subsidies strongly defend their local market share in order to defray some of their costs. Most developing economies, by contrast, cannot afford to pump up local production through heavy government subsidies. If they do, it is at an extraordinarily high cost, which cannot be successfully passed on to domestic consumers. The US's history of international rice trade is a window into the problems caused by restrictions and protectionism. As the world's largest economy, the US has an advantage in its capacity to absorb local production and aggressively market internationally. Its exports amount to roughly one-fifth of the world rice trade, ranking second only to Thailand in volume of rice exports. Depending on weather conditions, Vietnam is tied with the US, or in third place. American rice exporters have had a mercurial experience with important markets: Countries that once offered the most bountiful opportunities are now inaccessible. The reasons range from international calamities to overnight protectionism. Until August 1990, Iraq was the largest commercial market for US rice, absorbing 20 percent to 22 percent of rice sold by the US Department of Agriculture's Commodity Credit Corporation (CCC), a commercially viable program through which foreign governments can buy US foodstuffs with USDA credits. One industry official calls Iraq's 1990 invasion of Kuwait and the ensuing international embargo of Iraq "a blow to the rice trade." But US-Iraqi relations prior to the Aug. 2 invasion braced US rice producers for problems. After Iraq used poison gas on its Kurdish population in 1988 and was threatened with US trade sanctions, the rice industry lobbied the Bush administration to leave the door open for US exports to Baghdad. Rice suppliers saw this Middle Eastern market contract in 1990 when Washington reacted to Iraq's abuse of CCC credits. The CCC's overall exposure to Iraq fell from $1 billion to $500 million in 1990. US exporters lost an important market in Nigeria, when it imposed an import ban in 1985. Between 1980 and 1985, Nigeria imported 565,000 tons of rice, 216,000 tons of which were from the US. Since the ban, US exporters have lost $80 million in potential annual revenue, industry analysts claim. EC restrictions cost US rice producers another $150 million in annual sales. "We have a nominal 17 percent duty on imported rice compared to 200 to 300 percent imposed by the European Community," says David Graves, president of the US Rice Millers' Association. "We have to sell a $300 ton of rice for $900 in order to pay for the EC duty." One of the US exporters' greatest restraints is the decreasing support of their own federal government, says Mr. Graves. "The total support our farmers have received has been reduced each year," he says, "that's a function of a shrinking federal budget." He says he'll work to "preserve supports until we have fair market access and a parity in subsidies with other producers." Many markets remain impenetrable to the US. Trade negotiators say their most challenging barriers are found in the Far East. "We face a plethora of tariff and nontariff barriers" in Asia and the Pacific, says Sandra Kristoff, assistant US trade representative for Asia and the Pacific. "They're generally higher for agriculture products than non-ag products, and higher in the region than anywhere in the world." "In the agricultural negotiations for the Uruguay Round [the GATT's current round of talks], our obvious problem [with US rice exports to Japan] is market access and subsidies," Ms. Kristoff says. Japan has been almost entirely closed to foreign-supplied rice, except for token imports. The government pays its producers eight to ten times the world price to produce one metric ton of rice. Land for rice fields is at a premium in the crowded island nation, driving up prices for consumers. US Commerce Department officials say Japan is just one example among many markets - including Taiwan, Nigeria, and South Korea - that would be good prospects for American rice exports if they were pried open by the GATT process. The US has made strides in gaining access to new markets for American rice producers. Graves says Mexico, now involved in free-trade talks with the US, holds promise, as do other Latin American countries. For the past two years, according to the USDA, US rice exporters have become the primary suppliers to the Mexican market. In the absence of a GATT solution to agriculture disputes, regional ties may become more pronounced. The volatility of markets has been instructive to US rice producers, who are always exploring new outlets for their produce. C. Michael Aho, director of economic studies and the international trade project at the Council on Foreign Relations, says an agriculture deal could be cut during the coming months of GATT talks, "but that depends on the US lowering expectations and Europe compromising."