survey (2016). This increased price would, other things equal elicit a substantial supply response from farmers, pushing domestic production of rice from 694,394.4 tons to 1,224,120 tons—a 76.3 percent increase. The increased price of imported rice occasioned by the tariff imposition and the robust domestic supply response would also lead to a large decline in rice imports from 335,816.5 tons to 115,736.8 tons and a consequent improvement in the rice trade balance (Table 12).

**Table 12: Results Tariff Simulation**

|**Tar**|**iff level**|**0%**|**1%**|**5%**|**10%**|**15%**|
|---|---|---|---|---|---|---|
|Key|policy indicators|Normative<br>Baseline|||||
|**1.**|**CPS (US$ Mn)**|1,401.6|1,192.5|1,189.5|1,187.9|1,187.9|
|**2.**|**Employment (No.)**|142,280|893,140|895,600|958,370|958,370|
|**3.**|**Consumption (Mt)**|1,002,010.2|909,536.1|908,370.7|907,743.2|907,743.2|
|**4.**|**Production (Mt)**|524,520|1,224,120|1,226,460|1,291,774.5|1,291,774.5|
|**5.**|**Imports (Mt)**|861,521.5|115,736.8|109,909.8|-|-|
|**6.**|**Exports (Mt)**|384,030|430,330|427,990|384,030|384,030|
|**7.**|**Trade balance (Mn$)**|(413.50)|96.70|96.74|155.15|155.15|
|**8.**|**Fiscal Revenues ($)**|-|154,300|761,670|-|-|
|**9.**|**Price ($/Mt)**|624.11|856.69|860.10|861.80|861.80|
|**10. **|**Price increase (%)**||37.3|0.4|0.2|0.0|

Source: Model output and authors calculations On the consumption side, because of the increase in price, total domestic consumption of rice would drop from the base level of 1,029,709.0 tons to 909,536.1 tons—an 11.7 percent decline. At the same time, the level of consumer/producer surplus would decline by 10.2 percent from US$1,328.3 million to US$1,192.5 million. The decline in the sum of consumer and producer surplus results from the fact that the total decrease in consumer surplus resulting from the price increase, which reduces demand, is larger than the increase in producer surplus resulting from the higher price. This is not surprising as many producers are also consumers.

The 1 percent tariff on imported rice also provide a positive impact on employment through the demand for increased labor, some of which is provided by temporary labor. As table 12 shows, the level of employment in the rice sector increases from the base level of 669,340 to 893,140—a substantial increase of 33.4 percent. Much of this increase comes from the 365,805 temporary workers added, as household employment falls by 21.2 percent to 527,335. Imposing a small 1 percent tariff on rice imports would therefore be good for domestic job creation.

Table 12 also shows the impact of further increases in the tariff level up to 15 percent. A 10 percent tariff result in an increase in domestic prices to the equivalent of US$861.8 per metric ton and would ultimately reduce imports to zero as the domestic supply response would put the domestic production in balance with the lower level of domestic consumption, which results from the higher price. Domestic employment would increase, but only marginally beyond the level when the tariff is set at 5 percent. The rice trade balance would be a surplus of US$155.15 million, since there is no import of rice, but exports of 384,030 Mt tons of rice at this level of tariff.

As Table 12 clearly shows, increasing the tariff beyond 10 percent, has little or no impact on the Market as with tariff at 10 percent the market would essentially become a domestic market with exports but no imports.

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