A Wall Street Journal article about U.S. rice exports to the African nation of Ghana is an example of the challenges in addressing the complexity of international trade policy. Readers would have a distorted view of U.S. rice policy and trade and if the only information they had was from the article.

The article “How Trade Barriers Keep Africans Adrift – West’s Farm Subsidies Drive Ghanaians Out of Rice Market, Fueling Poverty and Migration” by Juliane von Reppert-Bismark appeared in the December 27, 2006 U.S. edition. The story line is typical of trade stories in the popular press – people in poor rural areas of developing countries are being forced to leave for big cities due to cheap subsidized food from the U.S. because governments “run strict open-market regimes advocated by the World Bank and International Monetary Fund, with no payments to farmers and limited import tariffs.”

Ghana is a West African country on the coast of the Gulf of Guinea with a population of 22 million. It has an area of 92,000 square miles, slightly smaller that the state of Oregon. About 17.5 percent of the land is arable with another 9.2 percent in permanent crops. Only 77,000 acres are irrigated. Per capita GDP in 2005 on a purchasing power parity basis was $2500, about twice the level of poorer countries in West Africa. Agriculture accounts for about 35 percent of GDP and 60 percent of employment. The government began pursuing market reforms in the mid-1980s and is the most market-oriented country in West Africa, with economic growth of 5-6 percent per year. The country promotes itself as the Gateway to West Africa.

The U.S. Agricultural Attaché in Ghana in a May 3, 2006 report states, “The Ghana tariff system has four ad valorem import duty rates (0, 5, 10 and 20%), which became effective in January 2000. The standard rate of duty is 20% (for example rice and poultry).” Compared to many developing countries the Ghanaian tariff on food is low, but compared to the average U.S. agricultural tariff of 12.5 percent it is high. Keep in mind that an import tariff is a tax on consumers. A value added tax (VAT) of 12.5% on the duty-inclusive value of all imports is also levied, but raw foodstuffs are exempted from the VAT. Policy analysts can argue that a 20 percent tariff on rice is too high or low, but it certainly does not fit the label of “strict open market.”

The U.S. produces about 2 percent of the world’s rice and accounts for 11 percent of world exports, down from a 20 percent market share in the early 1990s and 25 percent in 1980 and 1981. The largest exporters as a percent of world trade are Thailand with 29 percent, Vietnam 17 percent, India 15 percent, U.S. 11 percent and Pakistan 10 percent.
The Economic Research Service of USDA released a Rice Backgrounder in December of last year that explained the U.S. position in the overall sub-Saharan Africa market, “The United States is not price competitive in Sub-Saharan Africa, and Asian exporters supply most of the region’s rice imports. U.S. commercial sales in the global market are almost exclusively high-quality rice, while Sub-Saharan Africa purchases mostly low- or medium-quality rice. In recent years, the South American exporters—Uruguay, Argentina, and Brazil—have shipped rice to Sub-Saharan Africa, with low-priced brokens accounting for a large share of the shipments.” The backgrounder further explains that the U.S. has been losing market share in sub-Saharan Africa over the past decade. The U.S. Agricultural Attaché in Ghana estimates that the U.S. provides about one third of the imported rice.

The Wall Street Journal article repeats the well-worn statement that U.S. rice farmers received $780 million in subsidies in 2006, but that is not the relevant number for trade policy concerns. The more critical issue is the amount of subsidies that the World Trade Organization (WTO) considers as the most trade distorting – the marketing loan program. According to the ERS Rice Backgrounder, “Total payments under the marketing loan program have declined each year since 2002 due to rising world prices. In May 2006, the adjusted world price exceeded the loan rate for all three classes of rice, making U.S. producers ineligible for marketing loan benefits.”

The article portrays farmers in Africa as the victims of policies of the U.S., the EU, the World Bank and the International Monetary Fund. These types of stories are damaging in a public policy context because they divert attention away from real policy issues. About three-fourths of the way through the article a key issue is raised, “According to the Ghana Rice Interprofessional Body, the country’s three-ton-per-hectare (2.47 acres) yield is half what it could be.” If yields were twice as large, Ghanaian farmers could provide low cost food for consumers and compete with Asian, South American and U.S. rice.

This has been recognized by the Food and Agriculture Organization (FAO) of the UN. Their website has a list of constraints and issues for sustainable rice production in Ghana, including: drought in upland areas and flash floods in rainfed lowlands (only 10 percent of Ghana’s rice land is irrigated), lack of suitable varieties, inadequate and irregular supplies of seeds, fertilizers and credit, poor road networks and marketing systems and weak research. The U.S. Agricultural Attaché in Ghana reported a similar list. Ghana’s agriculture lacks adequate infrastructure, has underdeveloped credit facilities and has difficulties in land tenure arrangements. This same list would apply to many countries in Africa with agricultural productivity problems.

It’s easier to frame Ghanaian farmers as victims rather than address public policies that strengthen their ability to increase productivity. While WTO trade policy reforms that reduce trade distorting subsidies are needed, they will do little to improve the competitiveness of Ghana’s rice farmers.