KONKURENCE V DOVOZU RÝŽE A POPTÁVKA V HONGKONGU A SINGAPURU

Rice import competition and demand allocation

in Hong Kong and Singapore

Konkurence v dovozu rýže a poptávka v Hongkongu a Singapuru

Tsorng-Chyi Hwang

Adresa autora:

Professor in the Department of Agricultural Economics,

National Chung-Hsing University, 250 Kuo-Kuang Road, Taichung, Taiwan, R.O.C.

Tel/Fax: 886-4-2876910, E-mail: tchwang@dragon.nchu.edu.tw

Summary:

Rice import agreements represent significant policy movements toward agricultural trade liberalization for Taiwan, Japan, and South Korea. To manage food policy objectives on farm income and food security at minimum government expense becomes same important issue for these countries. This study found a significant increase in the reliability of rice export supply in the world market which is considered as an important premise for Taiwan to lower self-sufficiency food level. The potential rice import structure of Taiwan may be from within Monsoon Asia rather than from other countries including the U.S. and Australia as potentially reliable suppliers. More supply control, relaxed food security operation, and decoupling income scheme are suggested as important and effective policy mechanisms.

Anotace:

Dohody o dovozech rýže znamenají významný politický pohyb směrem k liberalizaci obchodu pro Taiwan, Japonsko a Jižní Koreu. Pro tyto země jsou neméně důležité cíle potravinové politiky vzhledem k příjmům farmářů a pro potravinovou bezpečnost s minimálními náklady pro stát. Tento příspěvek zjišťuje významný vzrůst spolehlivosti nabídky exportu rýže na světovém trhu, což se považuje za důležitý předpoklad úrovně potravinové soběstačnosti Taiwanu. Potenciální struktura taiwanského importu rýže je spíše obrácena na země monzunové Asie než na jiné země včetně USA a Austrálie jakožto spolehlivé dodavatele této komodity. Jako významné a důležité politické mechanismy se doporučuje větší kontrola nabídky, volnější přístup k potravinové bezpečnosti a útlum příjmové soustavy.

Key Words:

Reliable Rice Export Supply, Potential Rice Import Structure in Taiwan, Food Policy Management

Klíčová slova:

spolehlivá nabídka dovozů rýže, potenciální struktura dovozu rýže na Taiwan, řízení potravinové politiky.

Introduction

In Taiwan, Japan, and South Korea, market access of foreign rice has been a key political and economic indicator of liberalizing agricultural trade. There is a conflict between their trade liberalization and the pursuit of food security goals without international competition. A food policy question confronting each of the three governments is how to manage the objective of providing income parity for farmers and a conformable level of food security at minimum government expense. Other than the commonly used supply control mechanisms, additional policy adjustments for increased import competition and maintained food security are considered as necessary.

To maintain farmers income parity at minimum government cost, supply control programs were subsequently applied to rice in Taiwan, Japan, and South Korea. Those programs tried to reduce government expense from high price support, including land diversification programs in Taiwan and Japan, and a shift from low to high quality but lower yield rice production in South Korea. However, rice imports by Japan and South Korea, as a result of the Uruguay Round GATT negotiations, and anticipated rice imports by Taiwan, as a result of negotiation for WTO membership, have challenged current projectionist and self-sufficiency food policies in these countries. 1 Thus the serious concerns of a weakening comparative advantage and instability of the world rice market have to be resolved by new policy mechanisms, at least, under a partially open market framework2 (Johnson, 1975; Wailes et al., 1994; Chen, 1994).

This paper attempts to clarify two important aspects of rice trade faced by Taiwan for the consideration of necessary adjustments on food policy mechanisms. First, the reliability of rice export suppliers to meet both food security and consumer interests is assessed. Second, the potential rice imports to Taiwan are of serious concern for maintaining the future competitive position of domestic rice production. Two important rice import possibilities are considered as essential to Taiwans rice supply control program as well as the level of food security. It is further argued that the long-run experience of Hong Kong(HK) and Singapore(SG), with diversified rice import sources and increased rice imports, may provide useful evidence on the reliability of rice supply and potential competitive structure of rice trade in the Asian market. Such an analysis of HK and SG is especially important for Taiwan because the negotiated future rice market liberalization will give freer market access than under the Simultaneous Buying and Selling System(SBS) adopted by Japan.3

In HK and SG, the import structure of various rice varieties may have reflected the nature of world rice production and trade. A large share of the worlds production is of the Indica type which is dominated by Thailand. The major rice production and consumption in Taiwan is of Japonica type which is also produced in Japan, northern China, Korea, the European Union, the United States, and Australia. Japonica rice accounts for only about 10 to 15 per cent of world rice production. The United States accounts for less than 2 per cent of global rice production, but its exports exceed 10 per cent of Indica and 20 per cent of Japonica world trade. Past research on the recognition of differentiated rice types investigated the impacts of rice trade liberalization on the prices and traded volumes in the world market (Childs, 1990; Haley, 1992; Cramer et al., 1993; Song and Carter, 1996). Other research, however, focused on the competitive structure of rice trade in Asia, accounting for 90 per cent of world production and 70 per cent of international trade, and other regions and found a noncompetitive rice trade market (Karp and Perloff, 1989; Yumkella et al., 1994). None of these studies looked carefully into the supply and competitive structure of free rice imports to HK and SG, nor did they conduct any empirical analysis of reliable supply and competitive advantage of rice exports to these high-income Asian countries.

This paper first reviews the characteristics of potentially reliable rice imports in the Asian region. Then a theoretical model of import demand allocation is presented, which allows the derivation of empirical estimation and hypothesis tests. The estimation results for the major groups of rice import sources into HK and SG markets are presented, and their implications for food policy adjustments in Taiwan are discussed to conclude the paper.

Relative reliability of rice imports

The relative reliability of world rice supply for Asian countries may be highlighted by rice market movements. The regional changes in rice supply and demand structure have moved towards a more market-oriented rather than traditionally defined thin rice market structure. Moreover, the experience of the already free rice importing countries such as HK and SG may provide evidence on existing reliable suppliers in the world or in regional markets for other high-income Asian countries. However, a countrys specific preferences for rice types and for a high but uncertain level of self sufficiency may have created problems of justifying the historical and current rice supply situations.

The structure of world rice disappearance provides information about the changing regional and world rice production and trade. Table 2.1 shows world rice production, stocks, use, and trade during the 1986-1997 crop years. For Asian rice producing countries, only Japan and South Korea have decreased domestic rice production due to over supply and relaxation of restrictions on imports. Asian countries dominate 87 per cent of world rice production. Many developing countries become rice exporters as they increase their production. Most of the rice production in other regions or countries outside Asia also have increased during the same time period. Specifically, Australia doubled its rice production while the United States increased its production by 30 per cent. Due in part to its export enhancement and supply control programs, U.S. rice stocks have decreased significantly while world rice stocks did not change much. Comparing use and production, total production grew more than total use. As a result, world rice trade increased 63.4 per cent between 1987 and 1997.

Part of the expansion of rice supply in the world market has been a response to the market access of rice exports to countries such as South Korea and Japan with high income, high production cost, and an autarkic market policies. Annual rice consumption in Taiwan is about 2 million tons while South Korea and Japan respectively consume 6.20 and 10.45 million tons. Taiwan has joined Japan and South Korea in agreeing on a schedule to further open their rice markets in coming years. It is expected that more than 15 per cent of market consumption in these markets will be supplied eventually from imports, which is nearly four times the current total HK & SG rice consumption.

The characteristics of stable rice imports to HK and SG may be attributed to satisfactory quantity and quality supply from various sources and the increasing residual rice supply from Monsoon Asia. During the 1987-1996 period, total rice imports fluctuated around the same level(350-400 thousand MT) in HK but increased significantly in SG from 200 to 300 thousand MT (Figures2.1 &2.2). The major import sources were Thailand and Australia for HK and Thailand for SG.4 Thailand and Australia increased their shares of exports to HK, as the U.S., Australia, and India increased their shares slightly to SG(Table 2.2). During the 1987-1996 period, the combined market share of Thailand and Australia in HK increased from 61.43 per cent to 94.99 per cent, with Thailand accounting for over 70 per cent on average. On the other hand, the combined market share of the U.S., Australia, and India in SG increased from 2.07 per cent to 4.41 per cent, as Thailand had nearly 90 per cent of market share. Even though rice from Thailand and Australia dominated in both markets, the significantly larger consumption capacity of Taiwan associated with its gradual relaxation of rice import control may lead to a recognition that the other rice exporting countries may become important suppliers and the U.S. may be an important source for these high-income Asian countries.5

Whether these exporters are able to supply Taiwan depends on the market situation and possible political intervention from Mainland China. Since the late 1980s, many south and southeast Asian countries have turned from rice importers to self-sufficiency or from self-sufficiency to exporters such as Indonesia, India, Pakistan, and Vietnam. Consistent rice purchases from HK, SG, and Malaysia have provided incentives for continuous production expansion within or outside of the Monsoon Asia economy. As a result, there exists enough flexibility for import demand to be shifted into high-income Asian countries with reliable strength of rice supply in the world market. However, the political threat from Mainland China may lead to a cautious treatment of self-sufficiency and food security in Taiwan. The tendency to lower government price support associated with the promised rice imports provide significant incentives to the possible relaxation of the food self-sufficiency level, which will in turn guide policy measures of decreasing production and increasing imports for Taiwan.

The increasing dominance of Thailands and Australian rice in HK and SG raises concerns that they may have exercised market power and gained much of the competitive advantage away from other exporting countries including the U.S. Yumkella et al.(1994) found that Thailand could only exercise limited market power on high-quality long grain rice in HK and SG markets during the 1980s. The international rice pricing structure of various exporting countries can be shown by the differences among the average import prices by import sources (Table 2.3). Thailand and Australia had similar average import prices in SG, but Australia received significantly higher prices than Thailand in HK. It seems that Thailand did not exercise much influence on the pricing to market (PTM) strategy for the two markets, as Australia practiced different pricing or export strategies and accounted for only a small market share with a lower price level than the U.S. in SG. It is interesting to note that Australia exported rice with the price set between Thailand and the U.S. prices and in the meantime gained a significantly better market share in HK than the U.S. As a result, the higher quality U.S. rice exports into the two markets provided less competition in terms of market share as compared to Thailand and Australia. India exported to HK the highest-price basmati-aromatic rice, which commands a price premium above regular milled non-aromatic high quality rice, but earned a trivial market share. Indian market share increased in SG with exports of its lower-price (non-aromatic) rice in the 1990s. Moreover, other countries competed in HK at price levels similar to Thailand and at prices lower than Thailand in SG. Accordingly, it is more difficult for rice exporters to exercise the PTM strategy in the SG market. The U.S. did not find the best way, including any possible PTM practice, to compete with Thailand and Australia in the two markets.

The assessment of competitiveness of rice imports into high-income Asian countries is important for various reasons. First, the import preference on different quality and type of rice may be quite different among importing countries. Second, there exists certain substitution possibilities among various rice quality and types. Third, those export source countries with low average export prices have been able to supply high quality and different types of rice to the world market given continuously improving technology. Finally, the convenience and lower transportation cost for countries within the economy of Monsoon Asia are among the marketing advantages in rice trade for the exporters with large market shares. The differentiated product treatment of imported rice in HK and SG, for the analysis of import demand allocation, may be used to test these hypotheses. The results should provide a reasonable basis to anticipate the implicit import structure of rice in Taiwan.

Import Allocation AIDS Model

The theoretical model employed in this paper is the Almost Ideal Demand System(AIDS) of Deaton and Muellbauer(1980), with the assumption of differentiated import sources. Derived from the Price Independent Generalized Logarithmic(PIGLOG) class of preferences, which permits exact aggregation over consumers, the cost (expenditure) function can be rewritten to approximate the importers behavior that differentiates goods from different origins. The complete demand system in share form is then derived from a well-specified6 flexible expenditure function by Shephards lemma (Shephard, 1970):

i=1,.., n (3.1)

where

is the expenditure share of source i in total imports of the specified commodity,

is the import price from source j , E is total import expenditure on all sources, and P is the aggregate price index defined as:

0.5

(3.2)

Since the price index P in the share Equation (1) is nonlinear and often causes difficulties in empirical estimation, researchers have used the following Stones index as a linear approximation:

(3.3)

Once the Stones price index in Equation (3.3) is used, this model is called the “linear approximate almost ideal demand system” (Blanciforti and Green, 1983). However, Moschini (1995) showed several other different measurement units such as Tornqvist, Paasche, and Laspeyres indices on P to be more appropriate than the Stones price index. The theoretical constraints imposed on Equation (3.1) of adding-up, homogeneity, and the Slutsky symmetry, respectively, are:

,

, and

;

; and

(3.4)

Marshallian price elasticities with the linear approximation and imposed restrictions are:

(3.5)

where

is equal to unity if i = j, and zero otherwise. The expenditure elasticity is:

(3.6)

Data and Empirical Results

Annual data from 1987 to 1996 and statistical tests were used in this study along with the trials of different price indices in the empirical model. It is assumed that rice import can be differentiated from different origins. The largest six import sources in terms of market share are Thailand, Australia, rest of the world(ROW), China, Vietnam, and the U.S. for HK and Thailand, ROW, India, the U.S. , Australia, and Vietnam for SG. Due to insufficient data in prior years, Vietnam is excluded from discussion in this study. Thailand was defined as an important source because of its dominance in the two markets. For a similar reason, Australia was defined as an important source in HK. Other individual countries mentioned above were considered as potential but not necessarily being the important sources due to their low market shares. However, different cost, quality, and type of rice exports may lead these individual countries to be an important and separable source in the model. The separability tests using 2 statistics suggested by Berndt and Christensen(1973) were applied on models with different price index definitions in Moschini(1995) and all countries not treated as an important separable source were grouped together as ROW.

Given that only 10 observations of the sample data were available, the use of more than 6 independent variables or 5 separable origins in each equation would have created a problem of full rank. Thus, four price indices, deflated prices by the HK or SG consumer price index, and per capita import expenditure are used for separability tests and performance comparison of different price index definitions used in this study. The AIDS model is estimated by iterative seemingly unrelated regression(ISUR) with imposition of homogeneity and symmetry conditions.

The test results for separability are explained by using the likelihood ratio test and system R2 as shown in Table 4.1. The selections of Paasche index with lagged share weight for HK and the Laspeyre's index with initial share weight for SG are based on the likelihood ratio test estimates shown in Table 4.2. In Table 4.1, most hypothesized groups of import origins are rejected at less than the 5 per cent level of significance, except for one combined origins in the HK market and there are two groups without full rank. However, the combination including the U.S., Thailand, Australia (or India), and ROW were used as unrestricted cases for the HK and SG markets, respectively. The test results on different combinations and more restricted combinations did not reject the unrestricted combination except the second restricted case in the HK market. Nevertheless, the unrestricted case was selected for the HK market due to a slightly higher system R2. The estimated results of the AIDS model using the unrestricted combinations in both markets were then used for the calculation of elasticities (Table 4.3 and Table 4.4).

Estimated Marshallian price and expenditure elasticities for rice imports in HK and SG are presented in Table 4.5. In the HK market, the estimated Marshallian own-price elasticities for rice were -2.53 for Thailand, -1.91 for Australia, and -4.16 for the ROW. This result implies that a 1 per cent increase in export prices to HK would lead to a decrease in rice exports by more than 1% for Thailand, Australia and ROW rice. Rice from the U.S. may not be price sensitive in the HK market. Presumably, only the U.S. was able to adopt PTM strategy to effectively increase export prices of rice without losing any of its share in the HK market. The significant increase of the U.S. export prices of rice to the HK market after 1991 are consistent with this conclusion.

Examining the cross-price elasticities indicates that there is a complementary relationship, mostly inelastic, between the U.S. and ROW and between Australia and Thailand. All other cross-price elasticities were positive, indicating a substitutability. Only the U.S. export price effects on the ROW export quantity was elastic representing significant complementary relationship. It is implicitly clear that the U.S. rice exports to HK market played an important role in setting high-quality rice price. The substitution effects existed between the U.S. and Australia, between Australia and ROW and between Thailand and ROW rice. The highly elastic U.S. export price effects on Australia represented the similar rice type and quality between these two countries and the potential dominance of Australia in HK market. The elastic relationships of the impact of Thailand export price on ROW exports and the ROW export rice on Australian exports imply the complicated combination of ROW sources. As a result, Thailand rice and ROW rice may be substituted by ROW and Australian rice, respectively.

The estimated expenditure elasticity by import source is conditional on the expenditure for imported rice. The estimated elasticity indicates the percentage response in quantities demanded from each supplier as a result of a 1 per cent increase in total import expenditure for rice. The expenditure elasticities were 1.35 for both Thailand and Australia in HK. These results indicate that if a larger budget was allocated to imported rice, both quantities and market shares for rice imported from Thailand and Australia would increase. Different expenditure elasticities from different rice sources further imply a non-homothetic expansion of rice import among the importing suppliers. The most likely reasons are considered as nonprice export promotion efforts by exporters and intrinsic quality characteristics of rice from different sources. The expenditure effects in the SG market represents a beneficiary market expansion for the U.S. , India, Thailand, and ROW as the total rice expenditure in SG may increase in the future.

In the SG market, the estimated Marshallian own-price elasticities for rice were -2.33 for the U.S. , -1.16 for Thailand, -1.51 for India, and -1.05 for ROW, respectively. Thailand and ROW rice have a smaller own-price elasticities implying that the rice import preference or loyalty of SG for these two sources was stronger than for rice from other countries. As a result, Thailand may not exercise any market power in the SG market which can be proved by the continuously increased imports but not market share of Thailand rice.

A negative cross-price elasticity greater than unity in absolute value indicates a significant complementary relationship between India and the U.S. which provide high-quality rice. On the other hand, a significant substitution relationship exists between rice imports from the U.S. and ROW and from India and Thailand as their cross-price elasticities are positive and elastic. It is interesting to note that the U.S. was able to make its rice distinctive to major competitors not in HK but in SG where Thailand accounts for nearly 88 per cent market share. The major competitor of the U.S. in the SG market was the ROW implying a potential disadvantage for the U.S. rice exporters to compete in this Monsoon economy.

Summary and Conclusions

Rice import prospects in Taiwan, Japan and South Korea under the GATT and WTO negotiations represent significant movements toward agricultural trade liberalization. At the same time, there are increasing concerns on how to manage the food policy objectives of providing income parity for farmers and maintaining adequate food security levels in these increasingly open markets at minimum government expense. Rice imports promised by Taiwan upon joining the WTO under the Taiwan-U.S. trade negotiations has put potential pressure on its rice sector. Consequently, current supply control and price support mechanisms in Taiwan are challenged by additional import competition and the expected weakening comparative advantage of domestic rice. Reliable export supply and proper adjustments in domestic policy mechanisms would become especially important for Taiwan to meet various government policy goals under the future freer agricultural trade environment.

The studies on the prospective rice import competition structure for Taiwan and the rice import demand allocation in the relatively free markets such as HK and SG are considered as a necessary approach to understand the likely import structure for a high-income country such as Taiwan. Taiwan, located within the major rice production community of Monsoon Asia, may become a potential rice importer and thus reduce its rice self-sufficiency in the near future. This paper discusses the rice import structure including the relative reliability of rice export supply in the world market as well as in the HK and SG markets and the import demand allocation structure by differentiated sources in terms of quality and type of rice, and their implications for Taiwan. The data analysis and estimation results are then used for identifying possible adjustments on food policy mechanisms in Taiwan.

This study found a significant increase in the reliability of rice export supply in the world market. It also identified the competitive advantage and substitution effects among differentiated sources in the HK and SG markets. The higher growth in world rice production than world rice use under a stable world stock level yielded more reliable rice supply during the 1986-1997 period. During the same time period, a 21.1 per cent increase in rice production in the Asian countries associated with the 63.4 per cent increase of world rice trade further proved the tendency toward a more reliable world rice export supply, especially in the Asian region. The shifts of many south and southeast Asian countries from importers to self-sufficiency or from self-sufficiency to actual exporters have characterized a market environment of stronger rice export supply than import demand, which is especially true in the economy of the Monsoon Asia. Moreover, HK and SG faced continuously increasing rice imports from Thailand, the U.S., and Australia, as they were considered the dominant and reliable rice export suppliers with segmented demand.

The gradual relaxation on import restrictions of high-income Asian countries such as Taiwan, Japan, and South Korea may provide more market potentials for rice exporting countries which in turn have incentives to produce more rice. In this context, the country with a small volume of imported rice, like Taiwan, may view those dominant rice exporters for the HK and SG markets as potentially reliable rice suppliers of various quality and type. Once high-quality rice is considered a better choice for Taiwan, the reliability of the U.S. rice export supply is possible because of its competitive advantage in the HK markets. However, the existing competitors of high-quality rice from Asian developing countries other than Australia may become even more reliable and competitive sources for the Taiwan market.

The potential rice import structure of Taiwan would be different from that of HK and SG because of the significant domestic consumption preference for Japonica-type rice. Although high-quality and high-price U.S. rice earned larger market share in the HK market but not in the SG market, it is appropriate to include the U.S. as one of the potential import sources for Taiwan because HK imported a larger share of Japonica-type rice than SG. The existing substitution effects of rice between the U.S. and Australia and between Thailand and ROW in HK indicate that the U.S. may become a more competitive source than Australia in Taiwan and Taiwan may easily import Indica rice from Asian countries other than Thailand. However, a significant complementary relationship between the U.S. and ROW creates a possibility of rice imports from within Monsoon Asia rather than from other countries including the U.S. It is expected that the production strategy of existing farmers for self-sufficiency in Taiwan depends much on its future on food policy mechanisms when rice of various quality and types is able to enter into the Taiwan market.

To achieve the government objective of parity income for farmers at minimum government costs, supply control for reducing self-sufficiency and thus for reducing volume under a high price support program was determined as the most important and effective policy mechanism. When Taiwans food security operation is relaxed along with the possible existence of reliable suppliers in the world market, the decreased level in self-sufficiency may become acceptable and the government costs for rice support programs may be further reduced. However, the elimination of price supports in future trade negotiations may create problems of maintaining farmers income parity.

Decoupling of payments from the government is a possible alternative to price supports, and would leave rice production more market-oriented. It is then suggested that encouraging higher-quality rice production with lower yields to gain market competitiveness should be part of the supply control mechanism, especially when price supports are to be terminated. Nonprice promotion efforts are also necessary mechanisms to include in the supply control system for domestically produced rice to gain expenditure effects on high-quality rice similar to that of the U.S. and Australian rice in the HK market.

This study concludes that reducing self-sufficiency is relatively safe with reliable export suppliers of rice and the inclusion of promotion on high-quality rice production. Taiwan needs to strengthen its rice marketing under the supply control program to enhance its market competitiveness when the government price support program is replaced by the decoupling payment mechanism. At least, higher-quality rice production in Taiwan would provide a possibility to segment its market with likely imported rice from countries like Thailand. It is expected that more competitive rice production will leave more room for the operation of decoupling payments. However, the food security level may become more important than ever before and we may need greater accuracy in estimating rice imports in future research.

Notes

1. Rice market opening may not be considered as only the state-trading format of Japan and South Korea. The author believes that future rice imports of Taiwan, Japan, and South Korea will be more market oriented which leads not only to import competition but also decreased domestic market share. As a result, food security concerns must be re-evaluated.

2. Except for the United States, Australia, Thailand, Argentina and Uruguay, the international market for rice is of a highly residual nature. Only about 5 per cent of world production is traded and Asia accounts for about 70 per cent of international trade. Many high-income countries have supported the domestic price to achieve self-sufficiency; others have tried to provide a low rice price to consumers. Sharp fluctuations in international prices may be found when poor harvests in major exporting or importing countries lead to sudden shifts of supply and demand in the world market. Taiwan, Japan, and South Korea have provided high price supports to offset the high-cost of small-scale farms with decreasing comparative advantage. For example, the comparative advantage of rice production in Taiwan evaluated by the domestic resource cost (DRC) has been found to be disadvantageous since 1982.

3. Since 1995, the Japanese government has recognized 34 wholesalers in an operation of SBS with only a small quantity (2~3 tons per year). Under SBS operation, the wholesalers determine the import sources and quality and submit a selling price and a buying price to the government. On the other hand, trading companies importing rice under the major commitments on minimum access during the GATT negotiations are restricted on import source and quality (Riethmuller et al., 1996). Taiwan was requested by the U.S. to provide significantly freer market access than Japan upon joining WTO as a formal member. Such a relaxation of the rice import ban is expected to put pressure on the Taiwanese market.

4. Rice exports from China decreased significantly while exports from Vietnam increased but at a relatively unstable rate. In 1996, both sources accounted for only a small share in the Hong Kong and Singapore markets.

5. Reliable rice suppliers are only meaningful in the sense that Taiwan relaxes part of its total rice consumption volume per year, because total rice demand in Taiwan is much more than Hong Kong and Singapore. However, the supply from these mentioned sources reflects growing ability to export. Once high-quality and high-price rice is accepted by Taiwan, the U.S. rice will be in a good competitive position. A remote concern will be the possible ban of rice exports to Taiwan from any of these countries, especially Thailand, due to political intervention from Mainland China.

6. The well-specified cost function assumes linear, homogeneous, and concave function of commodity prices.

References

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Table 2.1 World rice production, stocks, use, and trade in selected countries or regions a

a: Production is rough basis, but ending stocks are milled basis.

b: World rice harvest stretches almost 18 months and timing varies widely across countries and hemispheres.

c: Stocks are based on an aggregate of different local marketing years and should not be construed as representing world

stock levels at a fixed point in time. In addition, stocks data are not available for all countries.

d: Fore countries for which stock data are not available, utilization estimates represent apparent utilization, i.e., they include

annual stock level adjustments.

e: calendar year basis.

Source: Foreign Agricultural Service, USDA (1997), World grain situation and outlook and world agricultural production.

Table 2.2 Market shares in volume of rice exporters in Hong Kong and Singapore, 1987-1996

Unit: per cent

a: Blanks indicate negligible import shares. b: The rest of the world including count. mostly in MA. Sources: Hong Kong trade statistics, 1987-96; Singapore trade statistics, 1987-96.

Table 2.3 Average rice import prices of Hong Kong and Singapore by import sources

Unit: USD/Ton

a: The rest of the world.

Sources: Hong Kong trade statistics, 1987-1996; Singapore trade statistics, 1987-1996.

Table 4.1 Likelihood ratio test results for separability of rice import sources in Hong Kong and Singapore

a: Country origins are defined as Y1 for the U.S. , Y2 for Thailand, Y3 for Australia, Y4 for China, Y5 for the rest of the world(ROW) in Hong Kong; the definition of Y1~Y3 are the same, Y4 for India, Y5 for Row in Singapore. The test choices on combinations depend mostly on the significance of market shares in either markets. Those country origins with minimal market shares are not expressed as individual sources but are included in the ROW.

b: Likelihood ratio test statistics is calculated from

for each combination and -2(L1-L2)~

is used to obtain the estimates where L2 is from unrestricted model, L1 is from restricted model with m restrictions.

*: Denotes significance level at 5% level.

**: Denotes significance level at 1% level.

Table 4.2 Likelihood ratio estimates of import allocation model by different price index definitions

a: estimation results obtained by using ISUR procedure and Thailand,

U. S., Australia (India), and ROW as the sample combination. The

likelihood ratio obtained by leaving ROW and India as given for HK and

SG, respectively.

b: means the expenditure share on import sources of the beginning sample

period.

c: initial share weight result is selected due to better symmetric coefficients.

Source: estimated.

Table 4.3 Estimation results of the rice import allocation model in Hong Kong(Paasche index with lagged Ws) a

a: W and lnP denote market share of expenses and logarithm of average real price from various sources such that A for the U.S., T for Thailand, AU for Australia, and ROW for rest of the world, DEP represents real expenses on rice from various sources.

b: t statistics.

Source: estimated.

Table 4.4 Estimation results of the rice import allocation model in Singapore(Laspeyres index with initial Ws) a

a: same as Table 5.

b: t statistics.

Source: estimated.

Table 4.5 Marshallian elasticities for imported rice of Hong Kong and Singapore from restricted AIDS model

a: Blanks indicates these countries being excluded in the model.

*: Denotes significant level at 5% level.

**: Denotes significant level at 1% level.

Figure 2.1

Figure 2.2