A top Commerce Ministry official says he is confident the US will find the rice-pledging scheme is above-board, despite fears that it breaches World Trade Organisation rules on export subsidies.

Yanyong Phuangrach, permanent secretary of commerce, said the Yingluck Shinawatra administration's rice policy is about "income support" and is not a "subsidy" for rice farmers.

His comments followed a report that the US Agriculture Department will send its international economist and agricultural adviser to Thailand to study the rice-pledging scheme on the grounds it may be distorting market prices.

He said that by the WTO's definition, a subsidy involves measures aimed at reducing production costs, which leads to lower prices or price dumping at the expense of other countries.

"No damage is incurred in the international market. The money spent on the rice pledging scheme circulates within the country.

"I wonder on what grounds the US is accusing us. I am ready to clarify," he said.

Mr Yanyong insisted the government will sell rice from its stockpiles in small lots to avoid affecting market prices.

The government has cancelled several planned auctions because it does not want to sell the rice at low prices.

But it is highly unlikely the government can sell off its stockpiles above the pledged prices, he said.

Under the rice pledging scheme, the government purchases rice from farmers at 15,000 baht a tonne for white unmilled rice and 20,000 baht a tonne for Hom Mali rice.

He took to task the US government which pays its own farmers US$5 billion (160 billion baht) a year in subsidies and has rolled out a number of measures which have distorted market prices, including marketing assistance loans.

He said that Washington's $158 million food aid programme in Africa had adversely affected Thai rice exports.

Krisda Piampongsant, Thailand's ambassador to the WTO, agreed the rice pledging scheme does not violate the WTO rules.

He said the government has no intention to distort market prices by selling off stockpiles at low prices.

He also noted the price of agricultural products including rice would rise due to the severe drought in the United States and the floods which are wreaking havoc in the Philippines.

Srirat Rastpana, director-general of the Trade Negotiation Department, said the US scrutiny of the scheme was not unusual.

The US administration has a vested interest in the rice market too, he added. He said small countries such as Thailand have long been in dispute with bigger countries over export subsidies.

He said WTO rules on farm products are more flexible than those for other industries.

"It is the government's policy to take care of farmers. WTO regulations don't prohibit that," he said.

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong vowed the government would not review its rice policy, despite recent criticism by some economists that it is wasteful.

"The government works with the rice farmers. The pledged prices are in line with increasing production costs. The rice sales are based on market prices," he said.

Mr Kittiratt said rice stocks have climbed to 16 million tonnes and the government will not dump its stocks.
"The government will sell when the price is right," he said.

Nipon Puaponsakorn, president of the Thailand Development Research Institute, said the scheme is more of a "price support" system rather than income support.

He said the Commerce Ministry itself has promoted the scheme as a bid to influence market prices.

He admitted the rice pledging scheme is likely to distort market prices. But he insisted there has been no dumping.

"The damage so far is that rice buyers have been affected by rising prices. They may accuse us of trying to manipulate the prices," Mr Nipon said.

Source: Bangkok Post