According to media reports, the Assistant US Trade Representative makes it clear that rice needs to be included in the on-going talks on the US-Malaysia Free Trade Agreement (MUSFTA). The US does not believe that the inclusion of rice in the FTA would pose a threat to Malaysian farmers.

This belief appears to be supported by our International Trade and Industry Minister Rafidah Aziz, who is of the view that concerns that US rice will adversely affect Malaysian rice farmers are 'unfounded' as the US long grain rice that is imported is expensive and will never be grown locally.

However, our own investigations show that there is much cause for concern and the fears of farmers being adversely impacted by US rice imports are real and with basis.

In the FTA negotiations, the US will ask for rice tariffs to be reduced to zero (perhaps over some years) and for non-tariff barriers to be dismantled, which could include the quota and import monopoly currently in place by Bernas.

At present, there is not much import of US rice into Malaysia. This could be due to the 40% tariff which is imposed on imported rice and the quota maintained by Bernas. If the 40% tariff is removed and the US rice is allowed to compete freely, its price may become competitive with local rice, thus affecting local rice farmers.

Firstly, it is important to appreciate that the US rice is heavily subsidised. In the period 2000- 2003, the cost of production and milling of milled rice was US$0.41 cents per kilo while the export price was US$0.27 cents per kilo. The export price was thus 34% below the cost of production. Without the subsidy, US rice would not be globally competitive.

Secondly, in February 2007, the US export price of long-grain milled rice was equal to RM1.43 sen per kilo. If there is a 40% tariff, the US rice would not be competitive in the Malaysian market. However, with a zero tariff, it would be competitive as local rice varieties are retailing at RM1.70 to RM2 per kilo (depending on the rice variety).

In February this year, the US rice price was higher than that of the Thai variety. However, the price gap between US and Thai rice has become narrower over the months as was the case in the second half of 2005 when the Thai and US rice prices converged around US$300 per ton.

If a lower tariff is applied to US rice as compared to Thai rice, then the price gap between the Thai and US rice could indeed be narrower.

In any case, it is most unfair to allow the tariff on US rice to be reduced or even eliminated when there is such a huge subsidy give to US rice growers and exporters.

The position that rice should be excluded from the FTA commitments should be maintained as expressed by our Minister of Agriculture.

The writer is president, Consumers Association of Penang .