Tetsuji Tanaka^1,, Baris Karapinar²

In recent years, international grain markets have been exposed to considerable price volatility which was partly caused by supply shocks driven by extreme climate events affecting major grain exporters. In addition, a number of exporting countries resorted to distortive trade measures in the form of export restrictions which have led to additional shortages, undermining the reliability of the world trading system. Recent climate studies suggest that climate change-induced extreme events are likely to increase yield fluctuations. As trade volumes are also projected to increase, export restrictions constitute a systemic threat to the security of the global food supply. However, WTO rules and regulations on export restrictions are lenient, offering ample ‘policy space’ to member countries. In this context, this paper explores the potential welfare implications of productivity shocks and consequent export restrictions imposed on rice. We use a world trade stochastic computable general equilibrium (CGE) model with the Monte Carlo method, taking into account risk factors in the form of a wide range of productivity shocks to world rice supplies. Our findings suggest that welfare losses that are likely to be caused by increased yield variability, due to climate change or other factors, are expected to grow substantially if countries react to productivity shocks by imposing export restrictions. Losses incurred by rice importing countries in Asia and Africa are expected to be particularly high. The paper links these results to potential WTO reform initiatives aiming at improving world food supply stability under future uncertainty.

export restriction, rice, computable general equilibrium