Rice Trade Issue Divides Countries THE POLITICS OF RICE

Article excerpt

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. …