An Evaluation of Pakistan's Rice Trade Policy: A Case Study of Basmati Rice
Chishti, Anwar Fazil
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Permalink
https://hdl.handle.net/2142/72180
Description
Title
An Evaluation of Pakistan's Rice Trade Policy: A Case Study of Basmati Rice
Author(s)
Chishti, Anwar Fazil
Issue Date
1994
Doctoral Committee Chair(s)
Bullock, David S.
Department of Study
Agricultural Economics
Discipline
Agricultural Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Abstract
This study aims to estimate the welfare effects of the export tax imposed on Pakistan's Basmati Rice exports, compare with those of alternative policy options, and suggest possible policy reforms.
It is found that the export tax produces positive effects for consumers and negative for producers, but on balance, it yields a net social gain for the society as a whole. An 'Optimal Export Tax' scenario apparently has certain advantages over the existing export tax, but the effects of the two taxes are not statistically different.
A 'Free Trade' scenario provide compensation for producers, but entail losses in consumer surpluses and export tax revenues which exceed the gains in producer surpluses, and society, thus, bears net social costs.
A more realistic approach, then, seems to be a gradual elimination or partial removal of the existing export tax. A decrease of 10% and 15% in the export prices would, respectively, bring insignificant reductions in the tax revenues and net social gains associated with the existing tax. While a reduction of 25% in the export prices would produce the highest foreign exchange earnings; foreign exchange earnings would decrease if the export prices further fall. What level of cut in the export prices, would be reasonable, depend upon the objectives to be pursued.
The probable productivity gains, also, have certain bearing on Basmati rice trade. An estimated 10% increase in output, assumed to be generated by production gains, requires export prices to fall by 17% for market clearance; a smaller reduction in export prices would depress domestic prices as well as the output.
A more elastic export demand simulated for the existing export prices regime produces lower producer surpluses; in addition, the drop in producer surplus per unit of consumer benefit increases as far as the export demand becomes more and more elastic.
The above analysis suggests that tax on Basmati rice exports be eliminated so as the economy is free of its adverse effects. However, a gradual removal of tax seems appropriate in order to avoid the problems associated with a one-time complete removal of the tax.
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