A General Equilibrium Analysis of Japanese Rice Market Trade Liberalization

Kiyoshi Taniguchi
FAO of the UN, Italy
3:00 - 4:15 PM
Friday, November 30, 2001
Social Sciences Building 515

Abstract

The main interest of this study is to simulate the Japanese rice market under full trade liberalization. We simulate the impact on income of farm households and national self-sufficiency. We apply a Computable General Equilibrium (CGE) model of Japan to analyze Japanese rice policies. In order to utilize the CGE model, we built a twelve-sector Social Accounting Matrix (SAM) based on a 1995 Japanese input-output table, where households were divided into farm and non-farm categories. Policy scenarios and model simulation focus on WTO negotiations; we set the current tariff rate as three hundred per cent of c.i.f. import price, which is gradually reduced to zero per cent. It is assumed that imported rice is an imperfect substitute for domestic rice. We calculate the compensating variation welfare changes caused by full trade liberalization.
Results show that full trade liberalization is welfare enhancing for non-farm as well as farm households at any tariff rate, primarily through lower consumer prices. Full-time farm household income declines by only 6.3 per cent at the zero tariff, but is more than compensated by falling prices at the consumer side. Regarding national self-sufficiency, the ratio of domestic to imported rice in the market becomes seven to three. These simulation results apparently undermine the government's argument against trade liberalization.