Rice: global trade, protectionist policies, and the impact of trade liberalization.

tion policies have been pursued by restricting imports, in turn contributing substantially to international market thinness. Therefore, it is difficult to ignore the effect of domestic stabilization policies achieved through import and export restrictions as a significant cause of international rice price instability. In addition to the thinness of rice trade, another important structural characteristic is the geographic concentration of production and consumption in Asia. More than 90 percent of production and consumption occur in Asia—nearly two-thirds of it in just three countries (China, India, and Indonesia). With as much as 40 percent of Asian rice cultivated under rain-fed systems, the monsoon weather effects are magnified on rice trade. Finally, there is substantial market segmentation by rice type and quality. A key structural dimension is the degree of end-use differentiation. Substitution among rice types and qualities is limited by differences in taste preferences. Low substitutability Rice is one of the most important food grains in the world, accounting for more than 20 percent of global calories consumed and 29 percent in lowincome countries (table 10.1). Thus, policies that affect rice prices, production, and trade have a large impact on the poor. Despite the importance of rice as a basic staple, global trade accounts for only 6.5 percent of consumption. That means that most countries are selfsufficient in rice and face increased price volatility in times of production shortfalls. By contrast, wheat trade accounts for 18 percent of consumption, corn for 12 percent, and soybeans for 35 percent (USDA PS&D 2003). The thinness of trade for rice stems primarily from the use of protectionist mechanisms to achieve national policy objectives of domestic food security and support for producer prices and incomes in major rice-producing and -consuming countries (box 10.1). Jayne (1993) argues that the link between domestic stabilization policies and instability in world rice prices has been exaggerated, emphasizing instead the role of thin and fragmented