ANNOUNCED AS TEMPORARYNo
Export-related non-tariff measure, nes
The Thai government started the rice pledging scheme during the harvesting season of 2011/2012, that is, state purchase of Thai rice above market prices. The scheme was approved again in October 2012 for the 2012-13 crop season. Until October 2012, the Thai government had spent approximately 300 billion baht in rice purchases and plans to spend 405 billion baht on the scheme in the 2012-13 season.
The scheme has been justified on two grounds:
- to increase the income received by the farmers,
- to raise the stock on hand on account of national food security and to reduce uncertainty of market prices.
The US has challenged this rice scheme at the WTO, as Thailand is the world's largest exporter and the subsidy will lead to distortion of world prices. Whereas, the permanent secretary of Commerce in Thailand called the policy an "income support" and not a "subsidy", and clarified that it was in line with WTO rules.
This measure is included in the GTA database because of its potentially adverse knock-on effects for foreign buyers of rice. These effects arise from the combination of two circumstances: Thailand supplies a large share of rice to the world market and, therefore, arguably can exploit power in the world market for rice. Large scale Thai government purchases of rice effectively reduce the amount supplied on the world market, raising world prices of rice and improve Thailand's terms of trade. Under these circumstances the state purchases constitute a de facto export restriction, executed through a public procurement scheme.
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