By Eric Wailes, Frank Fuller, Harjanto Djunaidi and Alvaro Durand

Rice is one of leading agricultural exports from the southern region of the United States. Approximately 50% of U.S. rice exports are shipped to Western Hemisphere nations. Yet competition for these markets is intensifying as production expands in Argentina, Uruguay, Brazil, and Guyana. The U.S. is also facing fierce competition from Asian rice exporters, Thailand, Vietnam, India and China. The U.S. has remained competitive in the Western Hemisphere in part because, unlike competitors, the U.S. is willing to export rough rice as well as milled rice. Many Western Hemisphere countries have preferential tariffs that favor rough rice imports relative to milled rice.

Regional trade agreements such as NAFTA have helped to sustain exports. However, the proposed Free Trade Area of the Americas (FTAA) would subject the U.S. to growing competition from the MERCOSUR nations for rice trade in the Western Hemisphere.

This study evaluates the potential of U.S. rice exports under the proposed the FTAA Agreement against the existing trade regimes of the region. It is anticipated that this agreement will provide preferences for U.S. rice relative to Asian competitors but competitors within the Americas will challenge the U.S. as the dominant export supplier.

The study results indicate that the FTAA agreement will have limited impact on the global rice market because the Western Hemisphere consumes and produces less than 10 percent of the world’s rice. It accounts for nearly 15 percent of rice trade. The agreement increases trade of all types of rice by degree of milling with the largest increase in paddy rice. Prices increase marginally for milled and brown rice but by nearly 10 percent for paddy. Trade creation exceeds trade diversion by 568 thousand mt, nearly three percent of world rice trade.

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