Global Policy Forum

By Marwaan Macan-Markar

While Asia's leading rice-exporting countries have agreed to back a Thai initiative to coordinate the world's rice trade, one of the key elements of this unprecedented move - promoting export price stability - promises to be a daunting task. At a meeting here this week there was sufficient evidence of the challenge that lies ahead in the way some ministers couched their language.

They avoided talking about the specific details that would give teeth to a mechanism aimed at achieving such an end - price stability - through the possible formation in the future of a Council on Rice Trade Cooperation (CRTC). "We want price stabilization. Exchanging information will be vital for this," Abdul Razak Dawood, Pakistan's minister of commerce, said shortly after the one-day meeting he had with his counterparts ended on Wednesday. "These discussions were held with the aim of removing all the anomalies of fluctuating rice prices," said V Sreenivasa Prasad, India's minister of state for consumer affairs, food and public distribution.

The lack of specifics was evident in the official line, too, that emerged from the ministerial meeting with the five countries - China, Vietnam, India, Pakistan and host Thailand. Officials involved in the meeting said it is too early to work out the mechanisms to stabilize global rice prices.

However, the Rice Trade Cooperation meeting got under way with a clear recognition of the seriousness of this issue. The current rice trade situation in the world market is a "critically important issue", Adisai Bodharamik, Thailand's minister of commerce, said in his opening remarks. "The goal of this meeting is to find ways and means to secure price stability for all types of rice that are produced in all our countries," he added.

Among the hurdles this Thai-led initiative will have to surmount is the cost of sustaining a mechanism to achieve price stability, say experts in the field. "The costs of running such schemes might be very high for governments and outweigh the potential benefits producers could get," said Concepcion Calpe, a senior rice commodity specialist at the Food and Agriculture Organization (FAO), a Rome-based United Nations agency.

Mechanisms aimed at achieving price stability for such commodities as rice will require a "high degree of commitment by its members and a mechanism for policing their actions", she added. She pointed out that while attempts to achieve price stability through agreed mechanisms may work in the short term, it may not be sustainable over several years. "Because importers and non-participating exporters could react to a rise in prices stemming from the scheme by increasing their own production."

Currently, India offers rice at the lowest price on the world market, with one brand going for US$135 per ton, as opposed to a higher-quality brand from Pakistan, which is sold at close to $370 per ton. Thailand, meanwhile, has a brand of rice marketed at $200 per ton while a Vietnamese rice variety is sold at $191 per ton.

The five countries that are party to this rice cooperation agreement account for close to 70 percent of the world's rice trade, which, according to FAO estimates, is expected to be about 25 million tons this year. Thailand is the world's leading rice exporter, with some 7.5 million tons of rice billed for the overseas markets this year. According to the FAO, India is expected to take second place this year, with an estimated 4 million tons of rice, nudging Vietnam from the No 2 slot it had held during recent years.

The regular practice of price undercutting in the global rice trade was what triggered Thailand to push for the rice cooperation initiative, and follows a failed attempt by Thailand last year to create a "rice pool", in effect a rice cartel to stabilize world rice prices. Only Vietnam supported Thailand then.

Yet the countries backing the new Thai-led initiative may see in the current crisis faced by the world's coffee farmers the tough road ahead in achieving their twin objectives of securing price stability and, through it, the protection of rice farmers. And that comes after coffee enjoyed a price-stabilizing system set up under the international coffee agreement in the 1960s, but this arrangement came apart after the United States pulled out in 1989. Today, the coffee sector in developing countries is in crisis, states the London-based International Coffee Organization (ICO). "Prices on world markets, which averaged around 120 US cents per pound in the 1980s, are now 50 cents, the lowest in real terms for 100 years."

Oversupply of this commodity is one of the factors forcing prices down, consequently pushing into dire poverty coffee producers in the developing world who are forced to sell below cost. "Rice is a far more complex issue than coffee when it comes to a price-stabilizing system," said Alex Renton, spokesman for the Southeast Asia division of Oxfam, an international development agency that has just released a study on how the coffee crisis has affected Third World producers. The FAO's Calpe shares this view. If, for instance, price stabilization leads to an increase in the price of rice, there is nothing to stop consumers from shifting to an alternative grain or changing their consumption patterns, she said.

But, as Wednesday's meeting revealed, the ministers from Asia's leading rice-exporting countries are prepared to give the Thai initiative a chance to sprout shoots. According to Adisai, the Thai minister, "our five countries made history by agreeing to stick together to do something about rice prices".

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