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Trade Liberalization in Vietnam Rice Sector: Implications and Impacts

This draft presentation discusses the relevance of rice to the national economy, the position of rice in agriculture and export, and the trends in rice yield, area, production, and export in Vietnam. The project aims to understand the implications of trade liberalization in the rice sector, enhance capacity in trade policy and research, assess environmental impacts, and formulate policies to respond to the identified impacts.

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Trade Liberalization in Vietnam Rice Sector: Implications and Impacts

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  1. UNEP Country Project on Trade Liberalisation in the Agriculture sector and the Environment (Draft presentation) The rice sector in Vietnam 19 February 2003Geneva Project Leader: Truong Van Tyen, PhD Hue University of Agriculture and Forestry

  2. Trade liberalization in the Vietnam rice sector Relevance of rice to the national economy Rice, people and Vietnamese culture

  3. Trade liberalization in the Vietnam rice sector Rice position in agriculture and export

  4. Trade liberalization in the Vietnam rice sector Vietnam rice with its international position

  5. Trade liberalization in the Vietnam rice sector Trends of rice yield, area, production, and export

  6. Trade liberalization in the Vietnam rice sector Project objectives • Understand implications of trade lib. in rice sector • Enhance capacity in trade policy and research. • Assess environmental impacts of trade lib. policies • Develop methodology to the impact assessment • Enhance coordination and expertise in identify & quantify impacts of trade lib. in agriculture • Formulate policies to response to impacts identified • Perform cost-benefit analyses of policy implementation

  7. Trade liberalization in the Vietnam rice sector Local institutions involved • Hue University of Agriculture & Forestry: lead and coordinated the research implementation. • Team members: Economists, Community Dev. Agronomists, ecological & environmental specialists. • The team members involved are from: • Hue University (Central Vietnam) • Hanoi Agri. University (North Vietnam) • Mekong Delta Farming System R&D Institute (South) • Ministry of Agriculture and Rural Development

  8. Trade liberalization in the Vietnam rice sector Stakeholder Approach and process • Stakeholders: Universities, Institutes, Ministries, rice producers, traders, People Organisations, NGOs • Consultation and policy dialogue: carried out through the ISG to MARD for global integration (collaborated with the ISG Secretariat and ad-hoc theme groups related, and accessed the ISG e-forum) • Approach: Interdisciplinary team - consultation - stakeholder sensitization - specification - method development - data source - impact analyses - policy recommendation - policy dialogue and public hearing - and initial implementation of policy response

  9. Trade liberalization in the Vietnam rice sector Process for assessment implementation

  10. Trade liberalization in the Vietnam rice sector Development of In-country Methodology Partial Equilibrium Model and Regression Model are adopted for an ex-ant assessment, given: - Method familiarity to the team members - Secondary data availability and accessibility - Agrochemical use as a major source of env. impact - Responsiveness to WTO accession position, and - Relevance to national policy context for global integration

  11. Trade liberalization in the Vietnam rice sector Scenario analyses and indicators • Base Scenario: Simulate status of rice production and agrochemical use in 2006 without trade liberalization • Impact analysis: P1= reduce tariff rate to 5% (AFTA); P2=US’s tariff against rice import reduced to 8.3%; and P3=rice area reduced 10% (agri. diversification) • Indicators: (1) Rice supply, demand, export, and price; (2) Agrochemical price, amount used for rice, ; (3) Pesticide and chemical fertilizer amount miss-used against the economically maximum application rate.

  12. Trade liberalization in the Vietnam rice sector Assessment Methodology • Strategic screening the trade liberalisation impacts • Access to relevant and available data • Qualitatively comprehensive analyses of the impacts • Apply PEM to quantify agrochemical miss-used • Field visits for supplementing data needed and validating the qualitative analysis results/description • Impact valuation benefited from empirical studies on trade liberalization by shadow price conversion • Consultation and policy dialogue carried out via ISG to MARD. The Ministry has a numerous responsibility on environmental management

  13. Trade liberalization in the Vietnam rice sector Integrated Assessment of Impacts of Trade Liberalization and WTO Accession Three groups of policies affecting rice sector 1. The renovation “Doi Moi” on economic (and agriculture) management 2. The trade policies on trade liberalization 3. International commitments on trade deregulation

  14. Trade liberalization in the Vietnam rice sector The renovation “Doi Moi” on economic (and agriculture) management Land laws (1989, 1993, 1998) allocated agri. Lands to the farmers for long-term use and recognized their “full” ownership on land use rights Infrastructure investment for rice (agriculture) development: irrigation, make use of bare lands (1994), and agri development in Mekong delta (1996) Improvement of agri. technology and input supports: extension (1993); re-organizing input services (1998); breeding program (1999); removal fertilizer import restriction with tariff rate 0% (2000)

  15. Trade liberalization in the Vietnam rice sector The trade policies on trade liberalization -Domestic rice trade restrictions ( removed 1997) -The rice export quota: Process of quota allocation (decentralized in 1996) Sector participation in rice export (private in 1997) Removal the rice export quota (in 2001) -The export tax: reduced 25%-0% (1998), “flexible” -Milled rice import tariff: 20% (in 2000), 40% (in 2001) -Restrictions on fertilizer import: decentralized in quota allocation (1996), and removed (in 2001)

  16. Trade liberalization in the Vietnam rice sector International commitments on trade deregulation -Common Effective Preferential Tariff scheme (CEPT) for ASEAN Free Trade Area (AFTA): e.g. Tariff reduction: to 0-5 % by 2006 Removal of non-tariff barriers (NTBs) -Bilateral trade agreement with the United States (USBTA): e.g. Reduce tariff rates by 30 to 50 % by 2005 -Negotiation for WTO accession: e.g. Trade deregulation corresponding to WTO AoA

  17. Trade liberalization in the Vietnam rice sector Environmental Impacts • Stakeholder perception on env. impact of rice cultivation • Strategic screening of env. impact of rice growth including trade liberalization • Missed use of chemical inputs for rice • Degradation of rice genetic resources

  18. Perceived env. impact of rice intensification

  19. Stakeholders screening env. impact of trade liberalization

  20. Trade liberalization in the Vietnam rice sector Over/under use of chemical inputs in Red river Delta Optimal level

  21. Trade liberalization in the Vietnam rice sector Over/under use of chemical inputs in Mekong Delta Environmental Impacts Optimal level .....

  22. Trade liberalization in the Vietnam rice sector Most local varieties were replaced with modern one Spring Autumn Spring Autumn Spring Autumn MV TV MV TV MV TV MV TV MV TV MV TV

  23. Trade liberalization in the Vietnam rice sector Local variety area remained a very low share(% share of local varieties in total) Spring rice Autumn rice

  24. Trade liberalization in the Vietnam rice sector Social and Economic Impacts • Changes in income of householders • Changes in poor household percentage • Benefit and costs of IFPRI research on policy changes

  25. Trade liberalization in the Vietnam rice sector Estimated effects of removal of internal rice trade restriction on household income and poverty

  26. Trade liberalization in the Vietnam rice sector Estimated effect of removal rice export quota on household income and poverty

  27. Trade liberalization in the Vietnam rice sector Valuation of the effects • Valuation of overuse of chemical inputs • Human health cost from exposure to pesticide • Benefit and cost of IFGRI research on rice policy changes in Vietnam

  28. Trade liberalization in the Vietnam rice sector Cost of overused agrochemical (VND/ha)(computed base on overused amount & price) • … • ….

  29. Trade liberalization in the Vietnam rice sector Benefit* and cost of IFPRI research on rice policies *: included those from relaxing export quota and removing internal rice trade restriction

  30. Trade liberalization in the Vietnam rice sector Decision processes in rice policy changes in Vietnam

  31. Trade liberalization in the Vietnam rice sector A tentative policy package • Include env. education to stakeholders through puclic chanels and extension systems • Include consideration of env. costs into taxation of use pesticides and chemical fertilizers • Promote integrated or organic rice farming by providing supports to diversify farm production and develop non-farm rural small business. • Policy dialogue through ISG to MARD to low down and stabilize the plan for rice production, export amount, and support improvement of quality and price of Vietnam rice export.

  32. Trade liberalization in the Vietnam rice sector Project Experience: Preliminary Conclusions • The stakeholder awareness and concern of env. impact is much less than that of socioeconomic • Due to priority for food securiry and poverty, the trade liberalization was appreciated with possitive socioeconomics but neglected env. impacts • EIA in rice sector is limited because the perceived negative impact seemed to be low. Other limitation is data availability and accessibility • Qualitative impact assessment is not familiar to most resaerchers. In-country consultation is very limited. Impact valuation is new in VN, found very limited in the literature

  33. Trade liberalization in the Vietnam rice sector Project Experience: Steps Forward • Building stakeholder awareness of env. Impact, especially of trade liberalization via various forms of communication and training for researchers involved • Involve specialists in provision of technical supports to quatify the impact of trade liberalization • Initiate sensitization and dialogue with policy makers at ministry level of env. concerns on rice sector • Finalize the PEM to quantify the identified impacts • Carry out field visits for data subplement • Finalize the assessment and policy development

  34. Trade liberalization in the Vietnam rice sector Trade deregulation impact on rice sector (to be further analyzed) Po: Base scenario in 2005; P1: Tariff reduction to 5% P2: US tariff reduced to rice import; P3: 10% area reduction

  35. Trade liberalization in the Vietnam rice sector Trade deregulation on rice chemical inputs (to be analyzed) Po: Base scenario in 2005; P1: Tariff reduction to 5% P2: US tariff reduced to rice import; P3: 10% area reduction

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