KEITH JACKSON
A paper by Papua New Guinea’s National Research Institute says the PNG government’s proposal to introduce a quota system to control rice imports “discriminatory, unfair and anti-competitive”.
The proposed quota system is currently in the news due to possible breaches of international trade agreements and concern about its potential impact on domestic rice development.
The NRI said that failure to subject the proposed rice policy to public scrutiny and an absence of domestic rice production data has constrained economists and other experts from meaningful research and analysis of the policy’s likely impacts.
However, the NRI has used information from recent media reports, theoretical considerations and past experience to assess what the impacts might be on competition and consumer welfare.
As a result of this analysis, it contends that the proposed system of allocating up to 80% of the rice import quota to a preferred candidate is discriminatory, unfair and anti-competitive.
“A competitive market is good for an efficient outcome and allocation of economic resources,” the paper said.
“But the proposed import quota allocation system will frustrate competition and create an inefficient rice market in the country.
“By promoting anticompetitive trade practices through the proposed unfair import quota policy, the government will be violating the World Trade Organisation trading rules.”
The NRI cautioned that the “emergence of a monopoly trader in the rice industry is a dangerous prospect, especially with rice fast becoming a staple food throughout PNG.”
It said “the cost of survival for many households will increase” and pointed to the need for an effective and fair method to allocate quotas for imported rice.
“Import quota arrangements [should be] transparent and disclosed in a publicly available policy document,” the paper said.
“To avoid conflict of interest, import quota allocations should be made to trading companies; no allocation of quota should be made to domestic rice producers.”
This paper further recommended that the government adopt policies on rice production, an import quota allocation system and marketing that are not discriminatory, unfair or anti-competitive so market power and profits are not concentrated in the hands of favoured players.
The paper is available freely for download from www.nri.org.pg