NCPA - National Center for Policy Analysis


April 30, 2008

The damage that trade restrictions cause is probably most evident in the case of rice, says Tyler Cowen, a professor at George Mason University.

For instance:

  • Although rice is the major foodstuff for about half of the world, it is highly protected and regulated.
  • Only about 5 to 7 percent of the world's rice production is traded across borders; that's unusually low for an agricultural commodity.
  • So when the price goes up this highly segmented market means that the trade in rice doesn't flow to the places of highest demand.

Poor rice yields are not the major problem, says Cowen:

  • Global rice production increased by 1 percent last year and is expected to increase 1.8 percent this year, according to the United Nations.
  • The more telling figure is that over the next year, international trade in rice is expected to decline more than 3 percent, when it should be expanding.
  • The decline is attributable mainly to recent restrictions on rice exports in rice-producing countries like India, Indonesia, Vietnam, China, Cambodia and Egypt.

Restrictions on the rice trade run the risk of making shortages and high prices permanent.  Export restrictions treat rice trade and production as a zero- or negative-sum game where one country's gain comes at the expense of another.  That's hardly the best way to move forward in a rapidly growing world economy, says Cowen.

Source: Tyler Cowen, "Freer Trade Could Fill the World's Rice Bowl," New York Times, April 27, 2008.

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