Self-Sufficiency Versus Free Trade: The Case of Rice in Iran

Abstract

The dilemma of free trade and self-sufficiency for the case of rice in Iran justifies continuous governmental intervention in this market. Among all policy instruments, import tariffs have been extensively used to achieve self-sufficiency; however, the results of this policy are quite controversial and remain as a main question for researchers and policymakers. Hence, this article examines the economic impacts of increasing import tariff policy applying a multimarket spatial price equilibrium model. The results suggest that pursuing the goal of self- sufficiency by restricting rice import would be detrimental. Social welfare as well as real and per capita income are adversely affected by increasing import tariffs both in nationwide and regional scale except for 1 region, which is characterized as the largest net exporter region in Iran. Also results show that adopting free trade policies and improving rice yield may be the well-advised strategy in the case of rice in Iran.