The Rice Trek A Game for Primers in Negotiation

Transcription

1 1 EASYPol Module 180-c The Rice Trek A Game for Primers in Negotiation Southland Information Sheet

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3 FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: Southland Information Sheet 1 The Rice Trek A Game for Primers in Negotiation Southland Information Sheet Mirland has a fairly developed economy and a record of impressive economic progress that has been successfully managed and sustained for over three decades. It has a young and welleducated labour force and complex economic system that is more and more focused on highpotential sectors including technology and human capital-intensive services. Mirland is currently also a major player in international trade for agricultural products. In the last decade, Mirland s agricultural sector has surged capitalising on experience and good traditions in the area and the interest of foreign investors seeking to quickly tap into the opportunities created by the country s newly-found economic openness. An important cereal producer, especially of rice and barley, Mirland has been massively subsidising exports for about 8 years. Despite of the economic success, the country still has a relatively closed political system and less-than-friendly relations with some of its neighbours. Especially, inherited from its past is a history of hostilities with Southland over important ideological disagreements. In recent years, Mirland s ruling power has shown signs of moderation such as its intention to join the WTO and the recognition of the need for improved relations among the countries in the region. Mirland would like to join WTO within the next few years. To this end, in 2005, the government initiated a thorough analysis and revision of existing price and product policies to determine the impact that an eventual WTO membership would have on the economy and the degree of adjustment it will necessitate. The report concluded that WTO membership would benefit Mirland though, at least initially, it would come at a cost to some. Authoritative people in Mirland have voiced their concern that the continued use of export subsidies could damage the country s bid for WTO as well as pose a huge burden on the state budget. Most analysts think that the current debate and a turn in public opinion will eventually bring an end to the era of generous state subsidies, within a few years time. Mirland has been receiving press reports on the intention of Southland to use some of its leeway in tariff commitments it had negotiated under the WTO in order to exercise a higher level of border protection on rice. This is been taken seriously in Mirland because of the likely consequences on local producers for whom Southland represents their main export market. Many of the neighbouring countries are not large rice consumers. Southland, on the other hand, has a large and growing domestic market for rice what represents an opportunity for Mirland s outwards-oriented firms. Southland is a lower middle-income country with a rich resource base and a large rural sector, mainly agriculture-based 1. The country is a founding member of WTO and has also signed free trade agreements with neighbouring countries, such as members of the Common 1 As of 2001, 46 percent of Southland s population was rural while 45 percent of the country s workforce is engaged in agriculture (1999 figure).

4 2 EASYPol Module 180-c Applied Material Continental Market, with whom it is currently reducing tariffs. This, however, does not apply to Mirland who has remained outside the Common Continental Market initiative. In-line with its commitments, Southland has undergone important trade liberalisation reforms and resisted any pressures for more protection in agriculture what would have been seen by donors as a step back in terms of the country s commitment to free-trade 2. The government was also worried that higher food prices would adversely affect food security for poor urban constituencies. Opening up to trade has led to some positive developments like the increase in production and exportation of some key cash crops, the expansion of contract farming and emergence of viable input supply chains. Unfortunately, however, the expectation that price incentives facing smallholder farmers would improve has not materialised. On the contrary, grain imports have increased dramatically over the last decade or so, from 562 metric tonnes in 1985 to more than 2 million in The increase has been most marked in rice following a reduction of more than 55% in production. This effect is strongest in smallholder agriculture as rice is predominantly produced in peasant farms of less than 10 ha. Moreover, a recent government study on the incidence of poverty in Southland showed that 23.5% of people living under the national poverty line are rural as opposed to only 8.6% among urban dwellers. Most of the rural poor tend to be peasant farmers primarily engaged in grain production, especially rice. In these conditions, the government is worried about the effect that subsidised imports from Mirland are having on local rice producers. In response to Mirland s insistence on subsiding rice exports, Southland is considering raising tariff protection, as an anti-dumping measure, in order to: (i) (ii) protect its rice producers from unfair trade practices, and tackle problems of uncontrolled urbanisation and overcrowded cities by improving agricultural livelihoods and encouraging the development of the rural sector. Southland is not self-sufficient in rice. Moreover, almost every other year, the country experiences crop failure in cereals. As a result, it will continue to rely on imports, at least for the foreseeable future. Southland has made it clear that it has no intention of building up unjustified protection barriers but, in the interest of food security and economic development, it is determined to halt any products sold below their production costs. You are part of a group of government experts working hard to determine a level of border protection on rice that would deter any future dumping behaviour from Mirland while remaining in-line with your country s Uruguay Round commitments. Based on the information you have, your immediate task is to decide on the optimal level at which Southland should be setting its border tariffs on imported rice. The final objective is, of course, to maximise Southland s pay-offs from bilateral trade. Your team has already carried out some quantitative analysis and came up with the following estimation of pay-offs that 2 Technically speaking, the tariff bindings that Southland negotiated in the Uruguay Round still allow for high levels of protection of the agricultural sector, higher than what is currently in place, notably the possibility of higher tariffs on imported grains.

5 FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: Southland Information Sheet 3 each side would receive depending upon the tariff and subsidy levels adopted. Table 1 below summarises the results of the analysis. As the situation stands, right now, you cannot engage in direct negotiations with Mirland due to ongoing political disputes. Table 1: Pay-offs accruing to countries Southland Percent ad valorem tariff on rice imports Mirland 2% 5% 7% Percent ad valorem subsidy on rice exports 2% 5% 7% Note: Pay-offs are in International Monetary Units (IMU) per ton of traded rice. READERS NOTES EASYPol links By linking to the sub-modules listed here below, readers will be able to build the complete simulation game: The Rice Trek - A Game for Primers in Negotiation: EASYPol Module 180-a: Trainer s Instructions EASYPol Module 180-b: Mirland Information Sheet EASYPol Module 180-c: Southland Information Sheet EASYPol Module 180-d: Round 8 Information slip EASYPol Module 180-e: Payoff Calculation Sheet This module belongs to a set of modules which are part of the EASYPol training path Policy Learning Programme, Module 4: Policy and Strategy Formulation, Session 5: Rice Trek Simulation game Readers can follow other EASYPol documents under Module 4, which is structured as follows:

6 4 EASYPol Module 180-c Applied Material Module 4: Policy and Strategy Formulation Session 1: Making sense of policy processes Session 2: Two case studies: Making sense of policy processes Session 3: Key factors in state citizen synergy Session 4: Extrapolate Session 5: Rice trek Simulation game Session 6: Ministerial Loan Bargain Game Session 7: Pulling it all together

7 FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: Southland Information Sheet 5 MODULE METADATA 1. EASYPol module 180-c 2. Title in original language English FAO Policy Learning Programme French FAO Programme de formation aux politiques Spanish FAO Programa de aprendizaje sobre políticas Other language 3. Subtitle in original language English The Rice Trek A Game for Primers in Negotiation Southland Information Sheet French «Rice Trek» Jeu de familiarisation à la négociation Fiche d information «Southland» Spanish La travesía del arroz : Un juego para iniciadores en la negociación. Página de información sobre Southland Other language 4. Summary This simulation game emphasises practical learning. It is aimed at providing a controlled learning environment in which players can engage in role-playing to explore, first hand, and reflect on some key negotiation concepts and principles Date January Author(s) Azeta Cungu, Agricultural Policy Support Service, Policy Assistance and Resource Mobilization Division, FAO, Rome, Italy 7. Module type Thematic overview Conceptual and technical materials Analytical tools Applied materials Complementary resources 8. Topics covered by the module Agriculture in the macroeconomic context Agricultural and sub-sectoral policies Agro-industry and food chain policies Environment and sustainability Institutional and organizational development Investment planning and policies Poverty and food security Regional integration and international trade Rural Development 9. Subtopics covered by the module 10. Training path FAO Policy Learning Programme 11. Keywords negotiation, policy-making, negotiation approaches, strategies, tactics