Bilateral Trade Welfare Impacts of India's Export Ban of Non-Basmati Rice Using the Global Partial Equilibrium Simulation Model (GSIM)

Abstract

India, the world's leading rice exporter, banned the export of non-Basmati white rice, accounting for 25% of its total exports (or 10% of the global rice trade). The ban aims to ensure availability to domestic Indian consumers and reduce domestic market prices, impacting global rice market accessibility, consumers, and producers across twelve regions. The study utilized the global simulation model (GSIM) to analyze the effects of trade restrictions on industries. The model uses national product differentiation to assess trade policy changes at global, regional, or national scales. It examined importer and exporter effects on trade values, tariff revenues, exporter surplus, and importer surplus. It found that India's Voluntary Export Restraint (VER) ban on non-Basmati rice resulted in a higher local price and a negative global net welfare impact of USD 1.7 billion. The losses decreased to USD 1.4 billion when importing countries responded by reducing rice import tariffs by 25% and USD 1.1 billion when importing countries reduced tariffs by 75%. Sub-Saharan Africa, the Middle East, North Africa, and the Gulf Cooperation Council regions were most affected. The study also found minimal impact on consumer surplus in India due to inelastic rice demand.

Keywords: food trade; partial equilibrium global simulation model (GSIM); rice; trade barriers.

Figure 1

All Rice Price Index (Based on FAO Rice Price Index). Source: Food and Agriculture Organization (FAO) retrieved from https://www.fao.org/markets-and-trade/commodities/rice/fao-rice-price-update/en/, accessed on 20 October 2023) [4].

Figure 2

Index of market concentration in grain production. Source: Organization of Economic Co-operation and Development; OECD-FAO Agricultural Outlook 2022–2031, OECD Agriculture statistics (database), retrieved from: http://dx.doi.org/10.1787/agr-outl-data-en; U.S. Department of Agriculture; World Bank (accessed on 21 October 2023) [3].

Figure 3

Export shares of major rice-producing countries in percentage. Source: Organization of Economic Co-operation and Development; OECD-FAO Agricultural Outlook 2022–2031, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-outl-data-en; U.S. Department of Agriculture; World Bank (accessed on 21 October 2023) [3].

Figure 4

Geographical map displaying India’s rice import partners in 2021. Source: The Atlas of Economic Complexity by Harvard growth lab, retrieved from https://atlas.cid.harvard.edu/explore?country=104 (accessed on 5 November 2023) [8].

Figure 5

Export Markets and Producer/Exporter Surplus Measures. Source: Joseph Francois and H. Keith Hall, 2003. “Global Simulation Analysis of Industry-Level Trade Policy: the GSIM model”, IIDE Discussion Papers 20090803, Institute for International and Development Economics [28,29].

Figure 6

Imports markets and consumer surplus measures. Source: Joseph Francois and H. Keith Hall 2003. “Global Simulation Analysis of Industry-Level Trade Policy: the GSIM model”, IIDE Discussion Papers 20090803, Institute for International and Development Economics [28,29].