The Trans-Pacific Partnership now before the U.S. Congress is expected to have an overall positive impact on U.S. rice exports, but may pose a risk to long grain exports, according to a report from the University of Arkansas System Division of Agriculture.
Arkansas produces about half of total U.S. rice exports that have averaged $2 billion a year over the last five years.
The reduction in long grain exports should be more than offset by a projected increase in medium grain exports, said Alvaro Durand-Morat, a Division of Agriculture economist and lead author of Trans-Pacific Partnership: What can it mean for the U.S. rice sector.
Durand-Morat said the TPP may lead to opening more markets for American medium grain exports to Japan because of an increase in the import quota for that country.
American long grain rice exports may decline slightly, Durand-Morat said, because of increasing competition under TTP, especially from Vietnamese rice in the Mexican market. Mexico is the largest market for U.S. long grain rice, accounting for a quarter of all long grain exports in the past decade.
Under TPP, Mexico’s tariffs on Vietnamese rice — 20 percent on milled rice and 10 percent on broken rice — will be eliminated. Also, although Mexican consumers now prefer the higher quality of U.S. rice, Vietnam is making improvements in its rice quality.
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The report, by Durand-Morat and Distinguished Professor Eric Wailes, says the impact of the TPP on the global rice market will be limited for a number of reasons, including the small share of the global market that it represents — about 5.1 percent.
The impact also will be limited by an already high level of of trade integration among some of the TPP members and the modest trade liberalization granted by Japan.
Durand-Morat said the economic model he and Wailes used looked at the rice markets in greater detail than the one used by the U.S. International Trade Commission.
The USITC model considered all rice as a single commodity. The RiceFlow model used by the Division of Agriculture broke the U.S. rice market down into nine commodities based on rice types — long grain, medium and short grain, and fragrant rice — and milling degrees.
Durand-Morat said the model was run over 15 years to see what might happen over a long term. But any modeling effort has limitations when trying to model an entire economic sector, he said.