ASEAN Rice Sector in the WTO: Analysis of Demand and Supply in a Liberalized Trade Environment

Abstract

The ASEAN countries committed rice in regional and global trade agreements, but they remain guarded on possible unfavourable effects of trade liberalization on the rice sector. This paper aims to analyse the impact of opening the ASEAN rice sector to a globally liberalized trade environment, i.e. consistent with the WTO agreements. A Spatial Price Equilibrium model was applied in the trade analysis, whose attributes arepartial equilibrium and comparative-static. The model included the five major agricultural countries in the ASEAN region (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) and the rest of the world (ROW). The results of the model indicate that the liberalization of rice trade in accordance with the WTO agreements will result in increased demand in the ASEAN region. This will be brought about by thefall in prices in the ASEAN countries. Committing to reduce the soaring level oftariffs is expected to bring about a more positive effect on Indonesian rice sector, but this favourable outcome would not be realized if WTO agreements co-exist with the implementation ofthe ASEAN Free Frade Area (AFTA). Finally, the WTO trade liberalization process in the time of the implementation ofAFTA will effect trade diversions in the ASEAN rice sector.