External Trading Arrangements in Rice
The European Union has traditionally been Guyana’s largest export market for rice (see Statistics). At present well over half of all Guyana’s rice exports go to the EU. As a member of the African-Caribbean-Pacific (ACP) group of countries, Guyana receives preferential access for its products into the EU market. The conditions under which rice can be exported from the ACP to the EU are very precisely set out in various European Commission (EC) regulations. Rice exports from the ACP are subject to a quota and are charged a rate of duty that is lower than the rate charged on rice from other countries. Of the 77 ACP countries only two, Guyana and Suriname, export rice to the EU and Guyana is by far the largest ACP rice exporter. Guyana can export rice to the EU through two distinct routes, the direct ACP route or the Overseas Countries and Territories (OCT) route. In order to send rice through the OCT route, rice from an ACP country has to receive a certain level of processing in an OCT. The OCTs include Aruba, Bonaire, Curacao, St. Maarten and Turks & Caicos among others. The conditions governing export through the direct ACP and OCT routes differ. The system controlling the rice trade between the ACP and EU is detailed below. Quota System The EU has established a quota system to control ACP rice exports entering the EU market. There are presently three separate quotas for sending rice to the EU:
A total of 145,000 tonnes (125,000 tonnes whole grain and 20,000 tonnes broken rice) of rice can be exported directly from ACP countries to the EU. A further 35,000 tonnes of whole grain can be exported if it is processed in an OCT. Guyana exports well in excess of 100,000 tonnes of whole grain rice to the EU annually and fills the bulk of the ACP and OCT quotas. Prior to 1997, there was no quota restriction on the OCT route and Guyanese rice exporters took full advantage of this opportunity to greatly increase exports to the EU. This also resulted in improvements in our production and processing capacity. However as a result of pressure from Southern European rice producers the EU implemented a safeguard mechanism and placed the 35,000 tonne quota on the OCT route. This had a dramatic negative impact upon Guyana’s rice industry. The quantity that could be exported to the EU was constrained and also the prices obtained in the EU market declined. Unfortunately this change in the OCT route coincided with the unusual weather patterns associated with the El Niņo/La Niņa phenomenon when Guyana experienced both droughts and floods. The quotas are administered through an import licensing system. The European Commission issues import licences to European rice importers. The ACP direct route quota of 125,000 tonnes of husked rice equivalent is divided up and licences are issued three times a year. Each time that an allocation is made it is referred to as a ‘tranche’ and the allocations are made in January, May and September. The ACP quota of 20,000 tonnes of broken rice is allocated in two tranches in January and May. While the entire OCT quota of 35,000 tonnes of husked rice equivalent is allocated in January. In order to receive an import licence European rice importers must apply at the beginning of each tranche (January, May, September). Importers are required to pay a security deposit of, at present, Euro120 per tonne of the licence they receive. There are also rules governing how large a quota any single importer can receive, each licence issued must cover a quantity of not less than 100 tonnes and not more than 2,080 tonnes. The EU rice import market is dominated by a few very large companies and the vast majority of Guyana’s rice is imported by just two importers. Tariffs Rice that is exported via the OCT route enters the EU duty-free. This is the reason that prior to the quota being implemented in 1997 the bulk of Guyana’s rice went to the EU through the OCT route. It is also one of the reasons why the restriction of the OCT route had such a negative impact. When the bulk of our rice could no longer enter the EU via a route that was duty-free it had to enter through the ACP direct route which does attract a tariff (see below) and this contributed to a decrease in the revenue received by Guyana’s rice exporters. Exports via the ACP direct route (both whole grain and broken rice) are levied a duty that is equal to 35% of the tariff levied on third country rice imports less Euro4.34. The rate that is applied to third country (American, Australian, Vietnamese etc.) imports is referred to as the ‘Most Favoured Nations’ (MFN) rate. The tariff that is charged on third country imports of husked Indica rice (the rice exported by Guyana) varies each fortnight. The tariff was bound within the WTO at Euro264 per tonne (during the Uruguay Round negotiations each country declared a maximum tariff rate for each product, referred to as a bound rate, most countries chose a rate that was a lot higher than the rate that they actually applied so that in the future they would have the flexibility to increase the rate that they applied). The duty that is applied to Indica husked rice is lower than the bound rate and it varies in response to the circumstances prevailing within the EU and global markets. Consequently, the duty levied on Guyana’s rice exports varies fortnightly as it is a percentage of the rate applied to third country imports. To give a quick demonstration of how the tariff on Guyana’s rice is calculated we will use the bound rate of Euro264 per tonne as an example. The third country tariff (which varies every fortnight) is multiplied by 0.35 (264 x 0.35 = 92.4) and then Euro4.34 is subtracted (92.4 – 4.34 = 88) to give a tariff of Euro88. As stated above the actual applied tariff is considerably lower than this. The export of Guyana’s rice to the EU is controlled by the above mechanism of quotas, licences and preferential tariffs. This system has undergone many changes in the past and is likely to undergo even more changes in the future. CARICOM is Guyana’s second largest market and exports to the region are showing a marked increase. At present about a third of our exports go to CARICOM. Guyana’s Strategic Plan for the rice industry has identified CARICOM, as well as the wider Caribbean, Central and South America, as the priority focus areas for future development. The Caribbean Community (CARICOM) is a customs union. This means that in theory all of the members have a Common External Tariff (CET) that they levy on products entering from outside of the region (extra-regional trade). Products that are traded from one member of CARICOM to another (intra-regional trade) are not subject to tariffs. The system is not as straightforward as this explanation may suggest and there exist many exceptions to these general rules. In the case of rice, all forms of rice (paddy for milling, husked, white, parboiled, broken, semi-milled or wholly milled) imported from extra-regional sources are subject to a CET of 25%. Only paddy for sowing does not attract any CET. Most primary agricultural products attract a Special CET of 40% but due to the importance of rice for the cost of living, particularly of poor people, and its role in maintaining food security, it is subject to a lower rate. It has been estimated by the CARICOM Secretariat (1995) that the demand for rice imports into CARICOM is approximately 171,000 tonnes. This figure is obviously subject to change as a result of variations in the population, income and tastes within the region. In 2000 Guyana supplied 45% of this market. This means that at present just over half of the regional rice trade is accounted for by extra-regional rice. The largest source of extra-regional imports is the U.S., they supply approximately 40% of the CARICOM market. Rice farmers in the U.S. benefit from very high levels of subsidisation, in 1999 rice farmers in the U.S. received in excess of US$1.331 billion in farm aid (United States Department of Agriculture). Rice producers within CARICOM do not receive any subsidies and yet they have to compete against extra-regional imports from highly subsidised producers. In addition to the U.S., rice is also imported from Uruguay, Thailand, Vietnam, India and others. The stated purpose of forming a regional arrangement is to encourage intra-regional trade. As over half of the region’s rice trade is coming from extra-regional sources, it is obvious that the system is not achieving the desired outcome. Thus Guyana was instrumental in establishing a CARICOM Special Working Group on the Development of the CARICOM Rice Industry. This Working Group is examining all aspects of the rice trade within the region with a view to improving the operation of the system and increasing the integration of the various stakeholders. This page was developed by the Ministry of Agriculture, Regent &
Vlissengen Rds, Georgetown, Guyana, South America, P.O. Box: 1001 |
