Grain Drain: The Hidden Cost of U.S. Rice Subsidies

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Rice is the world's most important food commodity and also the mostprotected and subsidized. Tariffs, tariff-rate quotas, escalatingbarriers to processed rice, production and export subsidies, andstate monopoly trading enterprises are common. Worldwide, tariffson rice imports average 43 percent, and border protection andproduction subsidies account for three-quarters of income for ricefarmers in wealthier countries.

The U.S. rice program is no exception. The U.S. government supportsdomestic rice production through tariffs on imported rice anddirect taxpayer subsidies based on production, prices, andhistorical acreage. Those programs make rice one of the mostheavily supported commodities in the United States, withramifications for U.S. taxpayers and consumers and rice producersabroad.

Americans pay for the rice program three times over--as taxpayers,as consumers, and as workers. Direct taxpayer subsidies to the ricesector have averaged $1 billion a year since 1998 and are projectedto average $700 million a year through 2015. Tariffs on importedrice drive up prices for consumers, and the rice program imposes adrag on the U.S. economy generally through a misallocation ofresources. Rice payments tend to be concentrated among a smallnumber of large producers.

Globally, U.S. policy drives down prices for rice by 4 to 6percent. Those lower prices, in turn, perpetuate poverty andhardship for millions of rice farmers in developing countries,undermining our broader interests and our standing in the world.The U S. program also leaves the United States vulnerable tochallenges in the World Trade Organization.

For our own national interest, the U.S. Congress and the presidentshould work together to adopt a more market-oriented rice programin the upcoming 2007 farm bill, including repeal of tariffs and arapid phaseout of subsidies.

Daniel Griswold

Daniel Griswold is the director of the Cato Institute's Center for Trade Policy Studies.