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Abstract
In recent years, international grain markets have been exposed to
considerable price volatility which was partly caused by supply shocks driven by
extreme climate events affecting major grain exporters. In addition, a number of
exporting countries resorted to distortive trade measures in the form of export
restrictions which have led to additional shortages, undermining the reliability of
the world trading system. Recent climate studies suggest that climate changeinduced
extreme events are likely to increase yield fluctuations. As trade
volumes are also projected to increase, export restrictions constitute a systemic
threat to the security of the global food supply. However, WTO rules and
regulations on export restrictions are lenient, offering ample ‘policy space’ to
member countries. In this context, this paper explores the potential welfare
implications of productivity shocks and consequent export restrictions imposed
on rice. We use a world trade stochastic computable general equilibrium (CGE)
model with the Monte Carlo method, taking into account risk factors in the form
of a wide range of productivity shocks to world rice supplies. Our findings
suggest that welfare losses that are likely to be caused by increased yield
variability, due to climate change or other factors, are expected to grow
substantially if countries react to productivity shocks by imposing export
restrictions. Losses incurred by rice importing countries in Asia and Africa are
expected to be particularly high. The paper links these results to potential WTO
reform initiatives aiming at improving world food supply stability under future
uncertainty.