Changes in Patterns and Policies in the International Trade in Rice

RECENT DEVELOPMENTS in the world rice situation have had adverse consequences for commercial exporters, especially those in developing countries. During 1969 and 1970 prices fell by nearly 30 per cent, and at the same time it became increasingly difficult to find export markets. Exports from developing countries shrank to about 3 million tons in 1970 from nearly 5 million tons in the mid-1960s. As a source of foreign exchange earnings, rice accounted for about $350 million to developing countries in 1970, a loss of more than $200 million compared with average earnings for 1963–65. The adjustment to new factors in the rice situation does not, however, appear to be stated fully by such figures; trading patterns and policies seem likely to generate further declines in the future.

Abstract

RECENT DEVELOPMENTS in the world rice situation have had adverse consequences for commercial exporters, especially those in developing countries. During 1969 and 1970 prices fell by nearly 30 per cent, and at the same time it became increasingly difficult to find export markets. Exports from developing countries shrank to about 3 million tons in 1970 from nearly 5 million tons in the mid-1960s. As a source of foreign exchange earnings, rice accounted for about $350 million to developing countries in 1970, a loss of more than $200 million compared with average earnings for 1963–65. The adjustment to new factors in the rice situation does not, however, appear to be stated fully by such figures; trading patterns and policies seem likely to generate further declines in the future.

RECENT DEVELOPMENTS in the world rice situation have had adverse consequences for commercial exporters, especially those in developing countries. During 1969 and 1970 prices fell by nearly 30 per cent, and at the same time it became increasingly difficult to find export markets. Exports from developing countries shrank to about 3 million tons in 1970 from nearly 5 million tons in the mid-1960s. As a source of foreign exchange earnings, rice accounted for about $350 million to developing countries in 1970, a loss of more than $200 million compared with average earnings for 1963–65. The adjustment to new factors in the rice situation does not, however, appear to be stated fully by such figures; trading patterns and policies seem likely to generate further declines in the future.

Two developments in the rice situation came to the point of major economic significance late in the 1960s. These were improved productivity in rice cultivation in most major consuming countries and the expansion of exports by industrial countries. Until recently, trade in rice between countries where it is the staple food was the major exception to the general dependence of developing countries on developed countries for the principal part of their basic food deficits. Deficit countries had relatively large requirements, and in poor crop years rice or other grain imports were given some priority in foreign exchange allocation. In the last few years, the ability of most large importers to supply their own requirements, and sometimes to produce an exportable excess, was greatly improved. This was one of the most publicized aspects of the “Green Revolution.” However, the easing of the domestic balance in some countries, and the growth of exportable supplies in others, coincided with a willingness on the part of some industrial countries to provide rice, or to enlarge existing programs to supply rice, to the deficit countries. These supplies were in part the consequence of agricultural policies that resulted in nonmarketable production under normal commercial conditions and in part the result of rice disposal programs stimulated by public and official response to the problem of hunger. Both developments placed the longer-established rice exporters in a tightening squeeze between fewer and smaller market outlets and the preference for developed countries as sources of supply.

I. The Green Revolution and Trade in Rice

The developing countries of the Far East, together with Japan and mainland China, consume at least 90 per cent of the world’s rice. Efforts to assure a closer balance of national production and consumption have been intensified over a long period. The expansion of rice crops, usually with a policy target of complete self-sufficiency, has been a long-term goal. Various central ideas on appropriate means have been popularized in the postwar period, although with differing emphasis in individual countries—mechanization of rice cultivation, adoption of the Japanese system of multicrop cultivation, and improved strains of rice. But it was not until late in the 1960s that the breakthrough is believed to have materialized, when the so-called miracle rice strains became available for large-scale plantings, and the complex package of ancillary practices of cultivation, irrigation, and fertilization was well organized. These developments were the more striking as they followed (and also at the time helped in a minor way to alleviate) the drought-induced food scarcities that occurred in 1966–67 in the Indian subcontinent.

Failure to achieve a large and sustained expansion in foodgrain supply per person in the densely populated countries of Asia has been regarded as the most critical issue in the world food and agriculture situation. The vicissitudes of the rice sector are shown in Table 1 for the principal deficit countries. Per caput output was lower at the beginning of the 1950s than in the 1930s, and although there were some gains in the following decade (at a moderate rate of just over 1 per cent per annum), they were not sufficient to avert a serious setback in the mid-1960s after 2 years of drought in some areas. Compared with the beginning of the decade, output increased by only 2 million tons of paddy. Thereafter, with more favorable weather, crop production moved sharply ahead of population growth. Production on average in 1968–70 was 20 million tons larger than in 1964–66, an average annual growth rate of 5 per cent, compared with population growth of 2.7 per cent.

Table 1.

Rice: Growth Rates in Production in Major Importing Countries1in the Far East, 1934–38, 1949–53, 1959–63, 1964–66, and 1968–70

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Sources: Food and Agriculture Organization; United Nations, Yearbooks.

Ceylon, India, Indonesia, Korea, Malaysia, Pakistan, and the Philippines.

Middle year of period shown.

1937.

Productivity has been a more important factor in the recent improvement in supply than in earlier periods. Growth rates in yields late in the 1960s (3 per cent per annum) were much higher than growth in the use of land for rice (1.7 per cent per annum), whereas over most of the previous 30 years increased crops owed more to extension of area than to higher yields. Although the benefit of better weather cannot be isolated from other factors, increased yields are believed to have begun to reflect the crop results in those areas planted to improved seed. Moreover, the rapid spread of high-yielding varieties is so recent that the data available thus far probably understate gains already achieved.

As an indication of acceptance of high-yielding varieties, it is estimated that over the four seasons up to 1970 since commercial plantings began, use of the improved seed grew to nearly 20 million acres—over 10 per cent of the land under rice.1 The new varieties are reported to be capable of increasing yields severalfold in wide areas of Asia where previously only low-yielding indigenous varieties were suitable for cultivation, provided that farmers adapt to the new cultivation practices essential to realizing their potential yield. Second-generation varieties are now becoming available; these are said to be without the earlier defects that may have induced caution in adopting improved seed in some areas.

The impact of recent growth in output on the marginal external demand of deficit countries was large, since it was in such countries, more than in exporting countries among the developing producers, that the most vigorous efforts were made to encourage the spread of the new varieties. Coming on top of earlier productivity gains, the recent growth completely eliminated some outlets for rice, while others contracted to a small proportion of previous market capacity. Demand from individual countries became more irregular. These developments—discussed in the following section of the paper—greatly reduced the aggregate volume of imports into traditionally deficit countries in the Far East to about 2.3 million tons in 1969, compared with 3.1 million tons in 1963–65 (Appendix, Tables 11 and 12). Excluding the rather constant demand of Singapore and Hong Kong, which have practically no production, imports into other deficit countries were reduced to 70 per cent of the requirements in 1963–65, 1.9 million tons compared with 2.7 million tons.

These figures may understate the impact on trade of more ample domestic supply. One reason is that some governments have adopted a precautionary attitude and have continued to import some quantities to create national food reserves as an insurance against temporary shortfalls. India, for example, has commenced to build up a foodgrain buffer stock of 5 million tons. Second, imports have included large and increasing amounts for which use of convertible foreign exchange was not required. Import patterns, which include concessional transactions, do not reflect the extent to which trade might have been permitted in the absence of special arrangements.

The trade of Far East exporters fell off more sharply than imports by the developing countries of the region (Table 2). Far East exports (excluding Japan) declined from more than 4 million tons in 1963–65 to about 2 million tons in 1970. In the light of import trends, the decline in regional exports in the second half of the decade was not mainly a consequence of the improved weather in deficit countries following the drought years. Part of the decline can be ascribed to the diminishing overall requirements and part to the trading activities of developed countries, described in Section IV, and other factors.

Table 2.

Rice: World Trade, 1963–65 (average) and 1966–70 1

(In millions of metric tons)

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Sources: Food and Agriculture Organization and national sources.

Totals computed from unrounded data.

Partly estimated.

Australia, France, and Spain.

Members of the Council for Mutual Economic Assistance.

Excluding South Africa.

Arabian Peninsula countries only.

II. Changing Trade Patterns, Export Earnings, and Import Expenditures

The pattern of world trade in rice has undergone drastic changes since the middle of the twentieth century. Some important changes, still continuing, were of geopolitical origin—the trade posture of mainland China, national policies with greater stress on domestic needs following independence, and the effect of wars or civil unrest in some areas. The net result has been a contraction in world rice trade, although in the mid-1960s there remained a market for 7.5 million tons, compared with an expanding market that reached 10 million tons in the interwar period. Since the mid-1960s the volume of world trade has diminished further, to about 6.4 million tons in 1969, recovering moderately—mainly because of surplus disposals—to an estimated 6.7 million tons in 1970. Excluding trade on special terms, the market absorbed less than 5 million tons in 1970.

Despite the fall in imports by the traditionally deficit countries, the rice trade balance of the Far East region shifted from surplus into deficit in the 1960s. Until early in the 1960s the Far East (including Japan) comprised a group of chronically deficit countries and a group of long-established exporters of rice. There was a substantial export surplus in rice for the region as a whole, even without taking into account the exports from mainland China. Exports of rice from countries within the region (including Japan and mainland China) comprised 70 per cent of world trade, whereas imports accounted for 60 per cent. By 1969 this net export surplus had shifted into deficit. Exports from countries within the region had fallen to 45 per cent of world trade, while imports had remained close to 60 per cent. Thus, while the region was (and continues to be) the principal location of trade in rice, its role in the export trade has undergone a considerable change.

For the developing countries of the region, the transition from the net export position in earlier years to a substantial net import position by late in the 1960s was the result of varied developments in individual countries. In 1963–65 there was still a small net export of about 400,000 tons. By 1968, when the special needs of drought-stricken areas were still being met in part by drawing on all available rice in the region, and when Burma’s exportable surplus was exceptionally low, the net import balance of the developing countries of the region rose to nearly 1.4 million tons, a significant amount in nominal terms of import costs when import prices for good-quality rice had reached $190 a ton. By 1970, although the capacity of rice-consuming countries to supply domestic needs and to export rice had improved, the net import deficit had risen to about 2 million tons. Net imports might have been reduced if exporters in the region had not found difficulty, in contrast to 1968, in concluding sales contracts for rice in 1969 and 1970. The trade deficit in rice in the second half of the 1960s is probably an isolated departure from the normal position of the region. The trends in production in importing and exporting countries appear to be moving toward a resumption of an exportable surplus in the region. If this exportable production can move freely into trade channels, an export balance might be regained early in the 1970s.

The principal changes in Far East trade patterns in the last five years leading to the overall contraction in regional trade may be summarized as follows: (1) Japan, previously a large importer, became a large exporter. (2) Two other major consuming countries (Pakistan and the Philippines), which had been large purchasers through most of the 1960s, became virtually self-sufficient and began to seek outlets for some supplies. (3) Chronically deficit countries (India, Ceylon, Indonesia, and Malaysia) became significantly less dependent on imports. (4) Two former exporting countries (Korea and Viet-Nam) required large imports. (5) Shipments by the main traditional exporters (Burma, Thailand, and the Khmer Republic) were greatly reduced (see Figures 1 and 2).

Figure 1.
Figure 1.

Rice: Total Exports and Market Shares in World Trade, 1963–65 and 19691

Citation: IMF Staff Papers 1972, 001; 10.5089/9781451956337.024.A002

1 Excludes intragroup trade.
Figure 2.
Figure 2.

Rice: Changes in Net Exports and Imports, 1963–65 (Average) and 19691

Citation: IMF Staff Papers 1972, 001; 10.5089/9781451956337.024.A002

1 Excludes identified intragroup trade and trade unidentified by source or destination.

These shifts were the result of various developments, some endogenous to the region and others resulting from external factors. The largest single influence was the disappearance of the Japanese market. In addition, although the overall demand of the developing countries of the region continued to rise until 1968, intraregional trade contracted earlier, as extraregional supply increased, and declined rapidly after 1968. For exporters in the developing countries, the loss of market outlets was partly averted by a decline in amounts offered by mainland China. Sales of substantial quantities of Chinese rice had been negotiated earlier with Japan. The impact of extraregional exporters and the Japanese situation on the region’s traditional exporters was dampened in turn by the emergence of Korea and Viet-Nam as outlets for the major part of extraregional supplies. However, the role of developed countries as preferred suppliers prevented any significant growth in trade for exporters in developing countries, and intense competition for traditional import markets in the region developed. The inability of traditional exporters to maintain their share of either the region’s or the world’s import markets was itself related partly to their domestic production trends and marketing policies as well as to the pre-emption of markets by new suppliers.

The balance of payments impact of these shifts was far from negligible for both importers and exporters. In addition to the changes in volume, prices moved in recent years in such a manner as to increase savings in import expenditure for deficit countries and to reduce export earnings by more than the contraction in shipments. Prices have fallen sharply since 1968, when the price index of the Food and Agriculture Organization (FAO) for rice was at a peak of 147 (1957–59 = 100), and the market pressures in 1969–70 carried prices below average levels in most preceding years; the index at the beginning of 1971 was about 90 and remained close to that level during the year.

For importing countries, recorded trade values greatly understate savings in import expenditure, because a large proportion of their imports required no foreign exchange allocation. Even as recorded at nominal values, rice imports of the larger, traditionally deficit producing countries 2 totaled only $150 million in 1969, compared with over $300 million in 1963–65 and about $260 million in 1967–68 (Table 3). Import costs for these countries have thus tended to contract by more than the quantum of trade, although the major part of these savings has derived from their reduced needs and not from reduced prices. However, in some developing countries, balance of payments difficulties continue to be a limiting factor in authorizations for rice imports.

Table 3.

Rice: Changes in the Value of Trade for Selected Importing and Exporting Countries, 1963–65 and 1966–68 (Average) and 1969–70

(In millions of U.S. dollars)

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Sources: Food and Agriculture Organization and national trade returns.

Provisional and partly estimated.

Export earnings also fell more rapidly than the quantum of trade. In a representative period before the price boom, such as 1963–65, export earnings for developing countries averaged close to $600 million; during the boom the benefit to earnings of higher prices was canceled out by the scarcity of supplies. By 1970 estimated earnings had come down to about $350 million. This trend stands in sharp contrast to the higher values of shipments by the industrial countries. The value of shipments by industrial countries in 1970 was probably one third greater than exports by developing countries, and more than double that by the traditional Far East exporters. In 1963–65, the reverse had applied; shipments from developed countries were less than half the value of those from developing countries.

Contraction in earnings was most severe for Burma, taking into consideration both the rate of fall and the importance of rice in Burma’s economy. By 1970, earlier stringency in exportable supplies in Burma had disappeared, and there had been some recovery from the catastrophically low level of $50 million realized even at the exceptionally high prices ruling in 1968, compared with $141 million in the mid-1960s. The recovery, to $66 million in 1969, was limited by the price declines after 1968, and in 1970 it appeared that the exigency of selling existing government holdings against the type of competition that then had to be met led to acceptance of price cuts that more than offset increases in amounts contracted. Shipments rose by 7 per cent, but values dropped back by 20 per cent, to $53 million. A similar, though less severe, problem emerged for the more diversified Thai economy. By 1969, earnings had dropped to $140 million from nearly $200 million in 1963–65 and a peak of $225 million during the drought period. The volume of shipments was down to 1 million tons, compared with more than half as much again in the mid-1960s. The difficulties that Thailand, like Burma, had experienced in supplying export markets in some of the intervening years had disappeared in 1970; shipments could not be increased by lowering export prices and export taxes. The Khmer Republic, the third Far East country for which rice is the leading export earner, had by 1970 become critically affected by hostilities, but these difficulties were clearly superimposed on a deteriorating rice export situation. In 1969 recorded earnings were only $15 million, compared with $59 million in 1965. A specific influence on the Khmer Republic’s trade was the loss of its long-standing market in France for broken rice as livestock feed. The Republic of China’s exports appear to have been restricted more by the loss of a market in Japan and by internal requirements than by competition from other exporters, but higher levels of stocks for which export outlets are sought were reported recently. By contrast to the countries mentioned above, grain shipments as food aid helped Pakistan to maintain an export trade in high-quality rice, the markets for which are mainly of long standing in the Middle East oil-producing countries. However, by the end of 1970, Pakistan’s stocks were rising. Egypt maintained high export values, mainly by shipping increased quantities under the bilateral payments arrangements with the countries that belong to the Council for Mutual Economic Assistance (CMEA).

An estimate of the loss of export markets for some developing countries is obtained by comparing actual exports with exports as they would have been had market shares remained constant over the last five years (Table 4). The calculated exports allow for the overall decline in import requirements over the period, indicating changes in the relative position of exporters resulting from all other factors. Differences between hypothetical and actual shares are large for most groups of exporters. The Far East exporters, whose share declined most markedly (from one half to about one fourth of world trade), would have shipped nearly double their actual exports in 1969 (an additional 1.6 million tons) had they been able to maintain their share of the market. Their role in world markets was replaced primarily by developed countries (1.1 million tons as an actual excess over the hypothetical share) and by developing countries outside the Far East region (0.5 million tons), chiefly Egypt (see Figure 3).

Table 4.

Rice: Changes in Market Shares of Exporting Countries, 1963–65 (Average) and 1969

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Burma, Thailand, the Khmer Republic, and the Republic of China.

Italy and Australia.

Figure 3.
Figure 3.

Rice: Direction of World Trade, 1969

Citation: IMF Staff Papers 1972, 001; 10.5089/9781451956337.024.A002

The sharp growth in exports from developed countries affected the Far East export trade most in the years after 1968. During the drought years of 1966–67 and continuing into 1968, there was an exceptional demand for foodgrains and a relative scarcity of exportable supplies in Far East countries. In those years, food aid shipments of rice and other grains, principally wheat, played a crucial role in relieving famine and near-famine, in the Indian subcontinent in particular. From 1969, stocks began to build up in exporting developing countries, notably in Burma and Thailand, despite the willingness to adjust export prices downward rapidly (Table 5). At the end of 1970, stocks seemed to be approaching levels that were twice as high as in most years in the 1960s.

Table 5.

Rice: Changes in Carry-Over Stocks in Exporting Developing Countries, 1966–70 1

(In thousands of metric tons, milled equivalent)

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Sources: Food and Agriculture Organization’s Rice Study Group and national sources.

December 31 of year indicated.

Government procurement less disposition.

Government stocks only.

III. Round-Grain and Long-Grain Rice

The pattern of world trade is influenced strongly by preferences for particular types of rice. These permit even countries that have a continuing overall deficit to carry on a relatively small export trade in certain qualities of rice, for example, in Basmati rice exported from India and Pakistan. The major distinction of importance in world trade is between round-grain and long-grain rice. Broadly speaking, round-grain rice is consumed in East Asia (Japan, mainland China, Korea, and the Republic of China), while long-grain rice is preferred in other countries of the region. Rice production in the United States is mainly of the long-grain variety, and Latin American producers have tended to cultivate varieties developed in the United States. Egypt and Europe produce chiefly round-grain varieties; some other crops, such as the Australian and part of the U. S. crop, can be classified as round grain.

The geographic pattern of taste preferences and type of rice produced would be an important determinant of trade patterns if consumers exercised free choice. However, in the postwar period, political as well as economic factors have greatly modified an earlier pattern of trade that reflected consumer preferences more closely. Trade in both round-grain and long-grain rice was taken over in large measure by government marketing agencies. Consumers of round-grain (and, to a smaller extent, long-grain) varieties were supplied with other types as determined by government purchasing policies. Trade in round-grain rice has diminished greatly, while long-grain rice has come to constitute the bulk of world trade. Private commercial trade in round-grain rice has fallen to an insignificant proportion of the total. The international movement of round-grain rice increased significantly when the Japanese program of disposal got under way in 1968. Over the postwar period, long-grain rice has been the predominant import into the developing countries with large deficits, but these countries have recently accepted somewhat larger quantities of round-grain rice.

Government motives for engaging in rice trade with particular partners have been various. The pattern of trade, particularly in the areas that consume round-grain rice, has been determined not only by the domestic balance but also by the ability and willingness of governments to conclude arrangements to supply or to take rice of particular kinds. The institutionalization of the world rice trade has been associated with—although it was not necessarily the original cause of—the continuous shifts in patterns of trade in the postwar period. Some of the main features can be used to illustrate the background to current problems.

Japan’s earlier reliance on supplies of rice from Korea and the Republic of China, where production was closely patterned to the Japanese consumer’s taste, was transferred, as the Japanese domestic balance worsened, to various other origins. The United States, Thailand, and Burma were tapped as major sources of supply at various times. Rice agreements were also concluded for a few years with mainland China, but, for the most part, large supplies of long-grain rice moved into consumption in Japan. As the domestic balance improved, consumers reverted to domestic types, and imports were shifted as far as possible into other uses. With the growth of government stocks of rice, Japan itself faced the problem of disposal in countries with other preferences, and the importers’ motives for allowing a reverse movement of round-grain rice into long-grain consuming areas since 1968 have again, apart from the shipments to Korea, been based on considerations that overrode consumer preferences.

Mainland China became a substantial net exporter of round-grain rice in the 1950s, and while the trade with Japan absorbed a large share for some time, an increasing proportion was later moved into other countries. The Sino-Ceylon rubber/rice exchange agreements, first concluded in the 1950s, were motivated by mainland China’s need to obtain assured supplies of rubber and by Ceylon’s payments difficulties, as they related to the policy of maintaining a subsidized consumer ration and to depressed world markets for rubber.3 With the drying up of trade with the U. S. S. R., Indonesia, and Japan in the 1960s (partly reflecting the state of intergovernmental relations), mainland China was a significant source of rice to a larger number of importers, notably Cuba, as well as Hong Kong and Singapore, as traditional consumers of round-grain rice. In 1969 about half the recorded imports from mainland China were by Ceylon and Cuba, and one fourth entered Malaysia, Singapore, and Hong Kong.

The large exporters of long-grain rice, Thailand and Burma, have had to contend with rapid changes in purchasing patterns from year to year in their main markets, as well as in the overall volume of import requirements. The instability of exports and the impermanence of market outlets is illustrated in Table 6. Burma’s export trade in an earlier period was linked closely to the requirements and tastes of the Indian subcontinent. Thailand’s trade was concentrated on neighboring producing countries. More than three fourths of Burma’s trade, and until 1970 of Thailand’s trade also, was with countries of the Far East. The proportion of Burma’s trade with the deficit producing countries of the region has diminished slightly but has remained close to two thirds of the total. The share of Thailand’s exports to these countries has fallen sharply, from about one half up to 1968 to about one third in 1970. Both countries have shifted a larger part of their smaller volume of exports to Singapore and Hong Kong, partly to take advantage of the well-organized entrepôt markets in these ports. For Thailand, these destinations are now larger than markets in deficit producing countries. Burma has attempted to sell more through the private trade in Singapore because of the difficulty of making government-to-government contracts with deficit producing countries. The instability of individual markets has been great for both countries. For example, India took 317,000 tons from both countries in 1969 and about 100,000 tons in 1970. Other markets, such as the Philippines, Japan, Pakistan, Western Europe, and Cuba, virtually disappeared as significant destinations for one or both of these exporters in particular years.

Table 6.

Rice: Destination of Exports from Burma and Thailand, 1963–65 (Average) and 1968–70

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Source: National trade returns.

Included, if any, in “Other.”

IV. The Development of Concessional and Subsidized Trade

From 1969 onward, concessional trade4 has grown to be so large that, coinciding with better crops in many consuming countries, the decline in the demand for supplies from traditional exporters can be described as critical. Paradoxically, as the main rice-consuming countries achieved faster growth in per caput production, their dependence on supplies from developed countries became greater. The world’s largest rice-producing area drew on additional supplies from industrial countries in a period when the region’s deficit was not attributable to emergencies or to limited export capacity within the region; favorable payments arrangements for trade with industrial countries were the principal incentive for this development.

The purely concessional trade originates almost entirely in two countries—the United States and Japan. The heavily subsidized exports of Italy, although still relatively small by comparison with the United States, and not backed by any large potential volume of supply from stocks as in Japan, also appear to be attracting importers in developing countries away from commercial sources of supply to those countries.

The share of these three industrial countries in world shipments of rice reached nearly 40 per cent in 1970, that is, about 2.8 million tons in world exports of 6.7 million tons (Table 2). The rise in shipments from the three countries is in sharp contrast to the decline in exports from other countries. The share of industrial countries in world trade has about doubled since 1963–65, when the United States was the source of practically all such supplies. Nearly all this trade is currently transacted as grants, under special credit terms, or with the aid of export subsidies. Judging by the rate at which agreements are being concluded for delivery in 1971–72, and by reported planned shipments, growth in these types of transaction is not slackening (Table 10).

The United States is the only large and long-established developed country that exports rice. Rice is produced under a control system of acreage allotments and marketing quotas, limiting quantities to those estimated by the authorities to be required for domestic consumption and trade. However, rice output has become more dependent on external disposal than any other leading U. S. crop; nearly 60 per cent was exported in 1969/70. By the early 1960s exports had reached 1 million tons and nearly 20 per cent of world trade. Exports increased sharply in the second half of the 1960s and in 1968–70 appeared to have peaked out at about 1.9 million tons, nearly 30 per cent of world trade in those years.

Most of the increase in U. S. production was moved into export channels with the aid of two major measures, Food for Peace programs 5 and commercial export subsidies. Shipments under Public Law 480, and some other types of transaction under government programs, including barter contracts, represented a larger proportion of exports after 1967 and increased to more than one half in 1970 (see Table 7). Exports under Public Law 480 are intended, inter alia, “to increase the consumption of United States agricultural commodities in foreign countries, [and] to improve the foreign relations of the United States.” Exports under barter contracts are intended to assist in improving the balance of payments position by saving dollar expenditures otherwise required for U. S. agencies.

Table 7.

Rice: Concessional and Other Trade by the United States, 1964–66 (Average) and 1967–70 1

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Sources: U.S. Department of Agriculture, The Rice Situation, and Foreign Agricultural Trade of the United States.

Fiscal years.

Mainly under the Charter Act of the Commodity Credit Corporation. Not reported separately prior to the fiscal year 1969.

Crop year ended July 31 of year indicated.

Milled, long-grain and medium-grain Second Head, ex-mill, Louisiana.

Average, all grades.

Growth in the U. S. trade in rice is directed largely to a few areas in which the United States has undertaken particular foreign aid or foreign policy commitments; other markets for the United States have remained, in the aggregate and for many individual countries, stable outlets for rice. About 60 per cent of total trade in the fiscal year 1970, mainly under government programs, was directed to Indonesia, Korea, Viet-Nam, and the Ryukyu Islands.

U.S. commercial trade benefits from a system of export payments intended to assist in preserving an equitable share of world markets for U. S. exports. In the mid-1960s these subsidies were relatively high and were applied to practically all exports (Table 7). After the fiscal year 1967, at the higher level of world market prices, subsidies were required in particular periods on a smaller proportion of export shipments; all shipments were subsidized in the fiscal year 1970, as export prices declined.

The entry of Japan and Italy into rice markets on a significant scale in 1969–70 thus came at a time when U. S. shipments were also comparatively large. Japanese exports commenced in 1969 and reached about 600,000 tons (close to 10 per cent of world trade) in 1970. Exports from Italy, which previously had not greatly exceeded 100,000 tons in most years in the 1960s, rose to 360,000 tons in 1970. Between them, therefore, these two countries moved nearly 1 million tons into world trade in 1970, whereas up to 1969 their role as exporters had been insignificant.

Japan’s decision to supply rice for external consumption was the result of an imbalance between price-supported production and a downward change in the long-term consumption trend, culminating in massive government stock accumulation (Table 8). The Japanese experience illustrated the difficulty of fitting production incentives to effective demand, especially when passing through a phase of rapid change in food consumption habits, as occurred in Japan in the 1950s and 1960s. Most of the rice crop is purchased by the Government, and despite the flexibility permitted to the authorities by reducing imports as production increased, they had, by the end of the 1968/69 season, to carry over stocks of 6 million tons, approximately equivalent to the total amount of rice traded in the world annually, and well above the annual commercial supply in international trade. When imports ceased in 1969, greater attention was directed toward reducing rice output. Farmers are being compensated for restricting output, and support prices were not raised in the fiscal years 1970 and 1971. However, the Government has set itself the major task of curtailing output by about 2 million tons of paddy (about 10 per cent of the 1969 crop), and whatever success is eventually achieved, the problem of disposal of surplus stocks remains.

Table 8.

Rice: Supply, Utilization, and Prices in Japan, 1964–66 (Average) and 1968–70 1

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Sources: U.S. Department of Agriculture, Foreign Agricultural Service, and Food and Agriculture Organization, Rice Study Group.

Years ended October.

Food, feed, and estimated wastage only.

1966.

Fiscal years beginning March of year shown.

1965/66.

Calendar years.

Estimated from prices stated in contracts.

Over a two-year period to the end of 1971, the Government contracted to deliver 1.6 million tons to other countries at various times in 1970–72, and during this period the pace of external disposal appeared to be accelerating. In the first ten months of 1971, shipments totaled 800,000 tons. The bulk of Japan’s exports were directed to Indonesia, Pakistan, and Korea. Smaller quantities were shipped as emergency aid or food aid. In addition, Japan was financing some purchases of rice by Southeast Asian countries in Thailand and Burma.

Italy’s ability to export larger quantities of rice also derives from high domestic support prices combined with export subsidies, or “restitutions” (Table 9). The initial effect of the Rice Regulation of the European Economic Community (EEC), introduced in 1967, was some displacement of third-country suppliers to EEC members. The much larger crops in Italy in 1969 and 1970, together with the less important crops in France, brought production to levels higher than EEC consumption for the first time. Disposition of these rice crops has been sought through subsidization of exports instead of by further protection against imports of other qualities of rice into EEC markets. The Common Agricultural Policy of the EEC does not, as presently constituted, set limits to the expansion of output in response to guaranteed prices, and the exportable supply is marketed at ruling world prices, with export “restitutions” fixed at amounts necessary to meet competition in world markets. The level of subsidy increased sharply as world prices fell and EEC internal prices rose. In mid-1970, export restitutions raised returns on exports of long-grain rice by $112 a ton and on round-grain rice by $88 a ton, about 80 per cent above international market prices. The disconcerting feature for Far East exporters was the appearance of Indonesia as the largest outlet (111,000 tons) in 1970.

Table 9.

Rice: Supply, Utilization, and Prices in Italy, 1963–65 (Average) and 1967–70

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Sources: Food and Agriculture Organization, Rice Study Group; Organization for Economic Cooperation and Development, Statistics of Foreign Trade, Series C: Trade by Commodities; Commission of the European Economic Community, Marchés Agricoles.

Calendar years.

At June 30.

July 31.

Years ended August.

1965.

Germany and Benelux to 1966/67; thereafter, all EEC members.

Adopted in September 1967.

Originario, 3 per cent brokens. Calendar years.

Partly estimated.

Only a small part of U. S., Japanese, and Australian rice exports has been shipped as grants. Apart from gifts, the principal financial advantage to recipients of concessional shipment derives from the type of currency to be used in payment, the credit and grace period, and the interest rate charged. These were in four main forms, covering the bulk of recent shipments. Two purchase arrangements for rice used by the United States under the provisions of Public Law 480 are local currency sales and convertible local currency credit sales (Table 10). Local currency sales set aside the bulk of the “counterpart funds” for use by the United States in the recipient country under an agreement with that country on their use. In practice, large amounts have been frozen or used for expenditures of mutual interest, such as defense. Local currency proceeds are also required to be convertible in limited amounts, although the conversion should not be so large as to place a burden on the foreign exchange reserves of the recipient. Convertible local currency credit sales were designed, following greater emphasis in 1966 legislation on U. S. balance of payments relief, to ease the transition from local currency sales to dollar credit sales after the end of 1971. The proceeds from such sales are currencies that could be converted to U. S. dollars. Since the option of convertibility lies with the United States, from the recipient country’s point of view the loans do not differ from liabilities incurred in dollar repayment terms. Loans are made for a maximum credit period of 40 years, with a grace period not to exceed 10 years. The minimum annual interest rate is 2 per cent during the grace period and 3 per cent thereafter. Dollar credit sales, of which there was one instance for a small quantity in 1970, have a 20-year maximum credit period and a 2-year maximum grace period. The financial arrangements used mainly for transactions in Japanese rice are also credit sales. Repayment is to be made in 30 years, with a 10-year grace period. Interest charges are 2 per cent in the grace period and 3 per cent thereafter. Japan has also made rice loans to be repaid in kind in 30 years, with a 10-year grace period, and, as far as is known, without charges.6

Table 10.

Rice: Supply Agreements with Four Countries on Concessional Terms for Delivery in 1971–72 1

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Mainly as notified to the Food and Agriculture Organization (FAO) Subcommittee on Surplus Disposal, under consultative obligations accepted under the FAO Principles of Surplus Disposal.

The Agricultural Trade Development and Assistance Act of 1954, as amended.

Usual marketing requirement

Estimated.

In view of the considerable advantages offered in the terms of concessional sales, and the magnitude of these sales, as well as the competition of subsidized exports, it is safe to conclude that markets for substantial amounts of rice have been lost to commercial trade. As noted in Table 4, the trade of the Far East group of exporters in developing countries was drastically curtailed and their market share halved over the last 5 years. The part of the loss that is attributable to concessional and subsidized competition involves consideration of the likely volume of their shipments and the level of world prices in its absence. Since transactions have been determined largely under government policies and frequently through government decision on individual contracts, assumptions as to alternative trading behavior are difficult. For example, while economies in import expenditure were important for recipients, it is probable that some use of foreign exchange would otherwise have been allocated at the expense of less essential imports. It is also plausible that the price effect of less—or no—concessional supply, or less subsidization, would have strongly supported export earnings from commercial transactions even if these were restricted by balance of payments constraints in importing countries.

While it is difficult to quantify the net diversion of trade that has resulted from concessional and subsidized exports, it is possible to catalog the general economic consequences of the trade for producers marketing their products without these aids. A direct balance of payments effect arises from the loss of export markets and the price declines resulting from the heavier volume of supply available for the remaining commercial markets. In addition, such producers ultimately carry the burden of adjustment of resources to the new market situation. In this sense, the countries selling rice on concessional and subsidized terms transfer the need for adjustment to the relatively low-cost producers, which in this instance are countries least able to bear the economic and other costs that such adjustments entail. The adjustments may be larger than the volume of trade on special terms; if rice support policies were reduced in scope, it is possible that some imports would be required.

Costs are also incurred by both donor and recipient countries from agricultural policies that lead to unmarketable output on commercial terms. The effect of misallocation in the exporting country may have as its obverse a retarding impact on additional allocation of resources to rice production in consuming countries and may make it more difficult to pursue an optimal long-term production policy under conditions of uncertainty about supported supply. These longer-term effects are, of course, weighed by recipient countries against the shorter-term advantages in the payments situation, and for all importers there are savings from the lower prices on the world market.

Prospects of a slackening of concessional sales and resumption of a larger proportion of commercial imports would seem unlikely, unless there are changes in underlying agricultural policies or in policies for disposition that would lessen the burden of adjustment on other exporting countries. In the United States, measures have already been taken to reduce the area planted to rice, although price supports have not been reduced. The output of rice is expected to continue to increase in Italy, and there are no indications of fundamental change in the EEC Rice Regulation or the policy of assisting exports. Italian producer prices have been raised for the 1971 crop. In Japan, support prices for rice have been stabilized and some reduction in production is aimed for, but it is not expected that the policy will take hold sufficiently to reduce existing stocks, without further recourse to overseas disposition, for some time. Japan and Italy have reserved the right to use rice to fulfill commitments to provide grains under the Food Aid Convention of the International Wheat Agreement. Under the Convention negotiated for the period 1971–74, long-term credit sales may be taken into account in such commitments. Consequently, the prospects for trade in rice between developing countries is not bright, unless there were a more deliberate redirection in policies with respect to food aid or export subsidization by developed countries.

Industrial countries subscribe to a general obligation to observe the principle that the normal pattern of production and international trade should not be affected adversely by sales of surplus commodities. This obligation is usually recognized through the inclusion of a “usual marketing requirement” (UMR) in arrangements notified to the FAO Subcommittee on Surplus Disposal. The UMR may state specific amounts of the commodity and also sources of supply of purchases in commercial trade. Rice arrangements have usually included a general assurance with regard to the principle. However, unlike arrangements for other grains, specific UMRs have been conspicuously omitted from rice arrangements notified to the Subcommittee; among 15 agreements to supply rice on long-term credit in 1971–72 (Table 10), 2 small arrangements included a UMR for amounts to be purchased mainly from the donor country, the United States. As noted, Japan has made grants for purchases of rice in Thailand and Burma. In the U. S.-Indonesian purchase agreements, it was noted that the fixing of UMRs was not desirable in view of the financial position of the recipient country. One exporter, Thailand, has notified the Subcommittee that, in its view, certain arrangements are interfering with its normal trade.

V. The Future Problem and Some Policy Choices

Reappraisal of national rice policies, in the light of a prospect of serious disequilibrium, has already been initiated at the production level in some countries. Nevertheless, the normal difficulties of gauging the supply response of agricultural producers to changes in official policies are compounded, for rice, by the uncertainties that attach to the rate of progress of a major technological change in agricultural practices. With the additional factor of the burdensome stocks that already exist as an element in the problem, changes in production policies, however effective in the long term, may well not avert a difficult period of some years before a stable trade balance can be regained. The downward pressure on prices seems likely to persist in the first half of the 1970s.

Projections of the likely imbalance in rice import requirements and exportable supplies are more than usually hazardous, but in broad terms the evidence points to a substantial oversupply in the first half of the 1970s.7 In the light of the rapid initial adoption of high-yielding strains of rice, policies should allow for the possibility of further growth in output in developing countries. Excess supply could be especially large if planned output were substantially realized. The development plans of many countries contain greater self-sufficiency targets. Indonesia, with imports of 0.6 million tons in 1970, aims for full sufficiency under the development plan ending in 1973/74. In the period 1969–73 four countries (India, Ceylon, Malaysia, and Korea) reporting for the FAO Medium-Term Forecasts for Cereals estimate the net intake to decline from 1.7 million tons to less than 1 million tons. These five countries, together with Viet-Nam, accounted for nearly half of world imports of rice in 1969.

On the export side, Thailand and Burma have not relinquished the expansion of rice exports as a target for the agricultural sector. The FAO Medium-Term Forecasts include estimates of an increased export supply in Egypt and Brazil (rising from 0.9 million tons to 1.2 million tons in 1969–73). Other countries, such as the Philippines, might find themselves in a position to seek steady export outlets, although current market prospects should induce caution in national policies that might result in overshooting the mark of self-sufficiency.

Adjustment to market conditions of excess supplies and low prices is more likely to be imposed eventually on exporting rather than importing countries. Countries with foodgrain deficits in which rice is a major component are unlikely to abandon growth targets that reflect not simply the economics of rice production but also the crucial role of rice in domestic and external stability of the economy. World market prices are not likely to play a large equilibrating role among exporters, however, since in all the developed exporting countries, producer prices are partially or fully isolated from external price movements. Government cooperation would be essential to an international market policy that was intended to avoid damage to the export-earning capacity of the developing countries.

The critical nature of the emerging problem and the need for a coordinated policy of adjustment is recognized by a widely representative group of governments participating in the FAO Study Group on Rice. At its session in 1970, the Group identified the major problem areas confronting the world rice trade at that time and for the medium term as follows:

  • (i) a fall in commercial import markets, possibly accompanied by an expansion of exportable supplies;

  • (ii) instability in prices, possibly with a declining trend in prices;

  • (iii) accumulation of surplus stocks in some developed countries and possibly in some developing countries too;

  • (iv) increased role of rice for export on subsidized and concessional terms by developed countries, and imposition of non-tariff barriers to imports;

  • (v) a diminishing share in world trade of developing exporting countries heavily dependent upon rice exports;

  • (vi) persistent gap between effective import demand and the physical and nutritional requirements of some developing importing countries owing to balance of payments difficulties and inability to take advantage of high yielding varieties for ecological reasons.8

Some elements of the approaches adopted and the actual experience with wheat, dairy products, and cotton marketing may provide valuable lessons for the rice problem. Most importantly, the root of the problem in each case lay in the basic agricultural production policies of major countries, and adjustment in those policies was eventually unavoidable. As interim measures, market sharing and the maintenance of minimum prices were also important, although the success of the techniques and arrangements adopted varied and is to be judged principally as they allowed producers to avoid abrupt dislocation in trade pending the fundamental adjustments in world supply.

The main international efforts of wheat-exporting countries to find solutions as self-sufficiency ratios increased in major markets, a system of concessional sales emerged, and massive stocks accumulated were in three directions. An international agreement placed a floor under prices, which in principle prohibited subsidized underselling, and provided only limited access to commercial markets for any exporting country not adhering to the agreement. In addition, stress was placed on specific provisions for the maintenance of commercial purchases by countries receiving wheat shipments under food aid programs. Food aid programs were financed in part by developed importing countries, including finance for purchases in developing exporting countries. Finally, exportable stocks could be reduced greatly in certain years through large sales to the U. S. S. R. and mainland China and to relieve, through food aid, sporadic setbacks to foodgrain production, including rice crops, in various parts of the world. These policies relied on the economic capacity of large wheat producers to buffer the adjustment of national production trends to international movements of wheat by holding large government-financed stocks of wheat for considerable periods.

These wheat arrangements, although operating throughout the 1960s, had limited permanent effect. Late in the 1960s the floor price could not be held, and the system was abandoned in 1971. The food aid programs, while linked to assurances that commercial trade would not be impaired, were smaller than the volume considered necessary by many countries to remove the amounts surplus to commercial transactions. Moreover, the large import needs in Asia and the U. S. S. R. diminished before adequate production adjustment was made, without any real prospect of their re-emergence over the next few years. At the present time, the large surplus stocks are being dealt with through the adjustment of support prices and other measures to cut back production.

Supply and demand imbalance in dairy products is being tackled, again mainly by the developed countries concerned, through a variety of measures—floor prices agreed internationally for one product, market sharing arrangements, food aid with close attention to commercial trade interests, and active efforts to raise consumption of products with good long-term market prospects. Nevertheless, while these approaches seem to have had some effect, some exporting countries have made large adjustments to resources in the dairy industry, and some countries have virtually shut off their consumers from imports in order to delay the need for restrictions on domestic production.

Another type of problem appeared for cotton. Concessional sales by the United States were less significant on a world scale, but price supports and subsidies resulted in a trend toward the generation of surplus stocks. Other producers were able to compete on price terms with U. S. cotton supplies. Increasing quantities were also marketed in Eastern Europe and the U. S. S. R. Three adjustment measures for cotton were carried out by the United States: crop restriction, domestic sale at world market prices, and lower subsidization of exports.

Although the role of developing countries in rice trade, both as importers and as exporters, places a different complexion on international relations compared with wheat and dairy products—and to a lesser extent, cotton—the essential objectives of a coordinated international policy would, as for those commodities, be the preservation of reasonable commercial opportunities for trade against concessional transactions and the prevention of excessive competition through price cutting in those commercial markets. In view of the financial and productive capacity of developed countries as rice exporters, both objectives would require the support of deliberate action on the part of the governments of developed countries.9

One aim of concerted international action might be to obtain concurrence on a global standstill or rollback of the volume of concessional trade, taking the view that deficits in many countries may diminish, causing in any case a difficult period of trade contraction and diversification of export production for commercial rice exporters. The criterion that concessional trade should be additional to normal commercial purchases could be met by placing a flexible ceiling on aggregate concessional shipments for domestic commercial sale (that is, excluding emergency shipments). That ceiling might appropriately be based on a market share for commercial exporters and could be determined in relation to forecasts of import requirements and export availabilities. An understanding or commitment on the part of exporters in developed countries to limit total concessional trade would require the adherence of a small number of countries.

In practice, limitation of concessional trade requires consideration of the interests of recipient countries for which such transactions relieve the balance of payments situation and have also in part provided the means to implement nutritional programs. In many such countries the intended improvement in self-sufficiency ratios should relieve the external payments situation. Moreover, it is generally accepted that shipments of surplus food commodities for which there would not otherwise be an effective commercial demand do not disturb world trade and may even lead to a long-term gain in effective demand.

The greater use of specific UMRs would be another means of safeguarding commercial opportunities for trade. As noted, these have not been employed significantly in concessional rice sales. Judging by the experience with other commodities, their inclusion as a normal practice would probably follow only from active representation to donor countries by other rice-exporting countries, including—although not confined to—the use of FAO notification and consultation procedures, to which most rice-trading countries adhere. An advantage of the form of UMRs used in many other commodities is that they do not bring rigidities into the pattern of trade, since they need not specify other individual sources of imports.

Since concessional trade has already encroached greatly on commercial trade, the establishment of an overall limit on concessional transactions or the greater use of specific UMRs would do no more than assure commercial exporters as a group of their currently diminished share in world trade, if based on a recent period. It might be more appropriate to consider commercial trade patterns in an earlier period as the base for concessional trade limitations. The guideline adopted for wheat in the 1971 International Wheat Agreement stipulates that concessional transactions should be additional to those commercial sales that could reasonably be anticipated in the absence of such transactions, with due regard to commercial import levels in a representative period and to the economic circumstances in the recipient country, including, in particular, its balance of payments situation.

A limitation on concessional trade would be of little value to exporters in developing countries if they were unable to compete on commercial terms with subsidized exports. As noted earlier, the danger that subsidized exports would acquire a greater share of the remaining markets became more pronounced in 1970. The large producers in developing countries have demonstrated, in the prices reported for recent government contracts, that they can be forced by market circumstances to make large price reductions to secure markets for existing rice stocks, but it is unlikely that over an extended period this type of competitive selling could be maintained without serious effects on the agricultural sectors and payments situations of such producers. The situation arising from subsidized exports of other commodities, such as wheat, dairy produce, cotton, and sugar, in world markets has demonstrated that while primary producers may be able to meet subsidization at fixed levels they find great difficulty in retaining markets against open-ended subsidy or highly flexible official pricing practices. The determining factor in such sales policies is whether the level of subsidy or other purchasing incentive allows the exporter to lead world market prices rather than to follow market price changes.

In principle, international acceptance of a minimum price level sets limits to price competition and subsidies, and may be justified, as in existing international commodity agreements, on the general criterion of assuring prices that are remunerative to producers and fair to consumers. Fixing minimum prices for rice would be a technically difficult task because of its variety, the need to establish location differentials, the habit of establishing prices for bulk purchases in contracts, and other factors. The task would be more difficult than for wheat prices, treatment of which has not been settled satisfactorily after nearly 20 years of international negotiation on the question. Even for relatively straightforward arrangements, for example, for sisal, the problem of fixing appropriate price differentials for certain grades loomed large. Consequently, although the administration of prices might be facilitated by the role of governments as sellers and buyers of rice, the technical problems of price setting could be insuperable. The question of restraint in subsidized price competition resolves to one of rationalization of national policies to take account, as with concessional trade, of effects on the normal demand and price.

Another possible solution is the introduction of quotas on exports from some or all producers. Quotas for other commodities in similar market circumstances have been organized in a variety of ways. They have been agreed internationally or imposed by a major importer; in some instances, exporters have adopted “voluntary” restraints at the insistence of importers, or groups of exporters have established them as a matter of self-interest. There have also been instances of a single major exporter adopting self-imposed quotas in its own interest and with benefit to other exporters. From the various elements of quota techniques in practice, some might seem applicable to the rice situation. If the few major producers among developed countries were willing to limit concessional trade, it should be possible to explore the possibility of similar commitments on subsidized commercial trade. In practice, this would require collaboration between the United States and the EEC with regard to existing trade practices, and with Japan with regard to potential trade. While such policies of export management could lead to savings in public expenditure and could avoid reduced farm incomes in developed countries in the event of stronger price competition between developed countries for rice markets, the principal consideration would be the export problems of developing countries.

A broader concept of international responsibility in trade policies could include the idea of compensation for disturbance by concessional or subsidized trade to normal patterns of trade and production. The principle of compensation for the effects of changes in trade policy on primary producers has made some progress in national programs for domestic producers in recent years, and has been discussed and practiced in an international context in connection with the effects of regional economic integration on preferential trading partners. One part of the wheat trade stabilization policy embodied in the International Grains Arrangement was to set aside certain cash contributions to food aid programs for purchases of grains from exporters in developing countries. A first initiative in this direction for rice occurred in some Japanese agreements. Although political relationships are more diffuse among rice-exporting countries than in other cases of compensation, the cost to exporters of loss of markets could be recognized in principle. In practice, their loss arising from concessional or subsidized trade would need to be distinguished from loss owing to the prospective increase in self-sufficiency ratios in deficit countries. In other arrangements of a compensatory character, this second element tended to be the basis for compensation, since the importing countries or regional groupings were imposing changes on their suppliers. Hence, the case for rice trade compensation would be more complicated and of more tenuous political motivation than in the context of other proposals.

For some developing countries and some agricultural commodities with contracting markets, bilateral trade agreements with CMEA countries have occasionally provided an outlet for the overflow of production. A large part of Egypt’s rice production is shipped under such arrangements. The initiation of arrangements for a significantly larger offtake of particular commodities by CMEA countries has frequently coincided with market crises for individual countries. Such large shifts in the pattern of trade in other cases have usually required a general reorientation of trade policies for imports as well as exports. The interest of the authorities of CMEA countries in expanded trade with rice exporters in the event of further serious deterioration in market outlets cannot, however, be predicted.

In conclusion, the foreseeable outlook for production and trade indicates an unfavorable future for exporters in developing countries in the medium term. If concessional sales are pursued actively while import requirements as a whole are contracting, commercial sellers in general will have to adjust to a residual market capacity. The weaker commercial sellers will probably be the low-cost developing countries, which, unlike developed countries, do not subsidize exports. Balance of payments difficulties would probably be serious for a few countries. Some exporting countries would have to move resources out of rice production, which might be feasible in the long term, since for most countries exports are a small proportion of the crop. The adjustment process for the domestic economy and to the external payments situation could proceed more smoothly, lessening the potentially critical short-term problems, if the incidence of subsidized and concessional exports in world trade were stabilized or reduced. Fuller consideration of the international implications of the rice-exporting practices of developed countries might indicate alternative means of disposal of output that lessened the burden of adjustment for developing countries or the need for changes in the production policies of developed countries. Arrangements to conduct food aid and other concessional programs without disturbing normal commercial trade, in accordance with general principles accepted by producers in developed countries, might be agreed as a global ceiling, since very few countries are involved in the trade, or through the use of UMRs in specific transactions. The limitation of subsidized competition in trade, when policies of subsidy are sufficiently generous to lead the market toward excessively low prices, is unlikely to be brought about by fixing minimum prices because of the technical problems of administering a minimum price scheme. Limitation, as for concessional trade, would be likely to be effective only through deliberate action on the part of such exporting countries. An alternative to the preservation of market outlets for commercial trade might be to compensate developing exporters for loss of markets.

APPENDIX

Statistics on the volume of world trade in rice, by major groups of trading countries, for 1963–65 and 1969 are set out in Tables 11 and 12, pages 82 and 83.

Table 11.

Rice: World Trade, by Major Groups of Trading Countries, 1963–65

(In thousands of metric tons)

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Burma, the Khmer Republic, the Republic of China, and Thailand.

Argentina, Brazil, Guyana, Egypt, and Uruguay.

Australia, Italy, and Spain.

Ceylon, Hong Kong, India, Indonesia, Malaysia, the Ryukyu Islands, and Singapore.

Exports not identified by destination

No data are included for North Korea, North Viet-Nam, and Macao.

Table 12.

Rice: World Trade, by Major Groups of Trading Countries, 19691

(In thousands of metric tons)

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Country groups as for Table 11.

Exports not identified by destination.

Modification des tendances et des politiques dans le commerce international du riz

Résumé

La baisse des cours, ainsi qu’un resserrement des marchés commerciaux pour le riz, ont considérablement réduit les gains en devises des pays en voie de développement, surtout en Asie. En 1970, le riz a rapporté environ 350 millions de dollars à ces pays, ce qui représente une perte de plus de 200 millions de dollars par rapport aux gains moyens pour 1963–65. Deux phénomènes qui ont revêtu une importance économique considérable dans les dernières années 60 semblent devoir provoquer d’autres difficultés au début des années 70. L’augmentation de la productivité dans l’industrie du riz dans les pays déficitaires a représenté l’un des aspects de la “Révolution verte”, de nombreux pays ayant adopté des variétés à haut rendement. En même temps, les pays industriels ont exporté des quantités de riz beaucoup plus considérables à des conditions avantageuses pour les acheteurs ou en subventionnant les exportations. Les facteurs géopolitiques ont eu, et continuent d’avoir, une grande importance dans les politiques de production du riz, ce qui a pour conséquence que, très souvent, l’orientation et les conditions des échanges commerciaux sont du ressort de l’Etat. Les exportations des pays industriels effectuées dans le cadre de programmes gouvernementaux ont également beaucoup contribué à remédier aux pénuries causées par la guerre et les mauvaises récoltes. Actuellement, néanmoins, une augmentation de la production de riz dans les pays déficitaires, les programmes d’aide alimentaire, et une amélioration du potentiel d’exportation dans les pays en voie de développement, amènent un grave déséquilibre de l’offre et de la demande. Alors que la situation des paiements dans les pays importateurs bénéficie largement de ces circonstances, les pays en voie de développement exportateurs de riz à faible prix de revient sont placés dans une situation de plus en plus difficile : d’une part leurs débouchés deviennent de moins en moins nombreux et de plus en plus étroits, et d’autre part la préférence est accordée aux fournisseurs des pays développés.

Il semble probable que le commerce d’exportation, jusqu’en 1975, sera instable et en général peu actif. Un ajustement aux tendances fondamentales de la production de riz pourrait cependant s’effectuer de façon plus égale si l’on stabilisait ou réduisait l’incidence des exportations subventionnées et des exportations faites à des conditions avantageuses. On pourrait s’efforcer davantage d’éviter de perturber les échanges commerciaux normaux, conformément aux principes internationaux généralement acceptés concernant l’écoulement des excédents. Certaines politiques adoptées pour d’autres denrées, telles que l’établissement de prix minimaux ne semblent pas pouvoir s’appliquer au riz. Il y aurait une autre solution pour garder leurs débouchés aux échanges commerciaux: elle consisterait à dédommager les exportateurs des pays en voie de développement de la perte de leurs débouchés.

Variaciones en la configuración y en la política del comercio internacional del arroz

Resumen

La baja de los precios del arroz acompañada por una contracción de los mercados comerciales han causado una fuerte reducción en el ingreso de divisas de los países en desarrollo, especialmente los de Asia. Los ingresos provenientes de las exportaciones de arroz de los países en desarrollo fueron de 350 millones de dólares en 1970, 200 millones de dólares por debajo del promedio que prevaleció en los años 1963–65. Dos factores de gran impacto a fines de la década de 1960, probablemente causen nuevas dificultades en los primeros años de este decenio. “La Revolución Verde,” que siguió a la introducción en gran escala de variedades de arroz de alto rendimiento, aumentó considerablemente la productividad del cultivo de este producto especialmente en los países deficitarios. También, al mismo tiempo, los países industrializados han suplido bajo convenios concesionarios y sistemas de subsidios cantidades de arroz cada vez mayores.

Los factores geopolíticos han sido, y siguen siendo, de mucho peso en la política de la producción arrocera. Como consecuencia de ello, los gobiernos han intervenido para orientar el comercio y definir sus condiciones. Las exportaciones provenientes de los países industrializados sujetas a programas oficiales también han desempeñado un papel importante en el alivio de las escaseces causadas por la guerra y las malas cosechas. Pero en la actualidad, los tres siguientes factores están causando un grave desequilibrio entre la oferta y la demanda del arroz: 1) una creciente producción en los países deficitarios, 2) programas de asistencia alimenticia y 3) una mayor capacidad de exportación de los países en desarrollo. Bajo estas circunstancias la balanza de pagos de los países importadores ha mejorado mientras los países exportadores en desarrollo han quedado perjudicados; las exportaciones de bajo costo de estos últimos han sido afectadas por la contracción de los mercados y por la preferencia que existe a importar de los países desarrollados.

Parece probable que el comercio internacional durante la primera mitad de la presente década sea inestable y hasta deprimido. Sin embargo, si se estabilizara o redujera la incidencia de las exportaciones bajo convenios concesionarios y sistemas de subsidios, el ajuste a las tendencias de la producción arrocera podría suavizarse. Podrían dedicarse mayores esfuerzos para evitar perturbaciones en el normal intercambio comercial concorde con los principios internacionales generalmente aceptados para disponer de excedentes. El esquema de precios mínimos que ha sido adoptado para otros productos no parece factible para el arroz. En vez de tratar de preservar los mercados comerciales podría compensarse a los exportadores de los países en desarrollo por la pérdida de los mercados.

*

Mr. Ridler, Chief of the Commodities Division of the Research Department, is a graduate of the London School of Economics and the University of Illinois. He was formerly a staff member of the Food and Agriculture Organization and a senior lecturer at Massey University of the Manawatu (New Zealand). He has contributed to various economic journals.

Mr. Yandle, an economist in the Commodities Division, is a graduate of Canterbury University (New Zealand), where he also taught.

1

In ten countries of the region reporting this information.

2

Ceylon, India, Indonesia, and Malaysia only.

3

In some earlier years, China purchased rice from Burma for transshipment to Ceylon under these agreements.

4

The definition of concessional trade used here is based on the internationally accepted list of transactions notifiable to the FAO Subcommittee on Surplus Disposal. The data also included U. S. barter transactions.

5

Under Public Law 480, the Agricultural Trade Development and Assistance Act of 1954.

6

Some exporters in developing countries began in 1970 to offer limited credit, usually for 1 year, in an attempt to retain markets.

7

FAO projects a difference of 2.6 million tons of milled rice between production and demand in 1980 (Food and Agriculture Organization, Agricultural Commodity Projections, 1970–1980 (Rome, 1971), Vol. 1, p. 109). Quantities available for export in the Far East are projected at almost double an average that was centered on 1970, while such quantities in the developed countries are projected as significantly lower, on the assumption that the surplus stocks in Japan would disappear before 1980 and that a balance between output and demand in that country would be restored following the cutback in production.

8

Food and Agriculture Organization, Report of the Fourteenth Session of the Study Group on Rice (Rome, May 1970), p. 1.

9

At its 1971 session, the FAO Rice Study Group recommended general guidelines on production and trade policies.

IMF Staff papers: Volume 19 No. 1
Author: International Monetary Fund. Research Dept.