The CGPRT Centre
The Regional Co-ordination Centre for Research and Development of Coarse Grains, Pulses,
Roots and Tuber Crops in the Humid Tropics of Asia and the Pacific (CGPRT Centre) was
established in 1981 as a subsidiary body of UN/ESCAP.
Objectives
In co-operation with ESCAP member countries, the Centre will initiate and promote research,
training and dissemination of information on socio-economic and related aspects of CGPRT
crops in Asia and the Pacific. In its activities, the Centre aims to serve the needs of
institutions concerned with planning, research, extension and development in relation to
CGPRT crop production, marketing and use.
Programmes
In pursuit of its objectives, the Centre has two interlinked programmes to be carried out in the
spirit of technical cooperation among developing countries:
1.
2.
Research and development which entails the preparation and implementation of
projects and studies covering production, utilization and trade of CGPRT crops in the
countries of Asia and the South Pacific.
Human resource development and collection, processing and dissemination of relevant
information for use by researchers, policy makers and extension workers.
CGPRT Centre Working Papers currently available:
Working Paper No. 29 Looking Into Agricultural Statistics: Experiences from Asia and the
Pacific
by J.A. Colwell
Working Paper No. 30 Measuring the Effects of Trade Liberalization: Multilevel Analysis Tool for
Agriculture
by Françoise Gérard, Isabelle Marty, Fréderic Lançon and Marion Versapuech
Working Paper No. 31 Economic Assessment of Selected Resource Management Techniques in Marginal
Upland Agriculture: Case Studies of China
by Ni Hongxing and Gu Shuzhong
Working Paper No. 32 Economic Assessment of Selected Resource Management Techniques in Marginal
Upland Agriculture: Case Studies of India
by Mahander Singh and G.C. Munda
Working Paper No. 33 Effects of Trade Liberalization on Agriculture in Pakistan: Institutional and
Structural Aspects
by Muhammad Ramzan Akhtar
Working Paper No. 34 Effects of Trade Liberalization on Agriculture in Malaysia: Institutional
and Structural Aspects
by Tengku Mohd Ariff Tengku Ahmad
Working Paper No. 35 Effects of Trade Liberalization on Agriculture in the Republic of Korea:
Institutional and Structural Aspects
by Myung-Hwan Sung
(Continued on inside back cover)
Effects of Trade Liberalization on
Agriculture in China:
Commodity Aspects
The designations employed and the presentation of material in this publication do not
imply the expression of any opinion whatsoever on the part of the Secretariat of the United
Nations concerning the legal status of any country, territory, city or area of its authorities, or
concerning the delimitation of its frontiers or boundaries.
The opinions expressed in signed articles are those of the authors and do not necessarily
represent the opinion of the United Nations.
WORKING PAPER 43
Effects of Trade Liberalization on
Agriculture in China:
Commodity Aspects
Jikun Huang and Chunlai Chen
CGPRT Centre
Regional Co-ordination Centre for
Research and Development of Coarse Grains,
Pulses, Roots and Tuber Crops in the
Humid Tropics of Asia and the Pacific
CGPRT Centre
Jalan Merdeka 145, Bogor 16111
Indonesia
© 1999 by the CGPRT Centre
All rights reserved. Published 1999
Printed in Indonesia
National Library: Cataloguing in Publication
Jikun, Huang
Effects of Trade Liberalization on Agriculture in China: Commodity Aspects /
Jikun Huang and Chunlai Chen -- Bogor: CGPRT Centre, 1999.
xx, 80 pp.; 25.5 cm. -- (Working paper series; No. 43)
ISBN 979-8059-98-0
1. China - Trade, free and protected
I. Title
II. Series
2. Agriculture - economic aspects
382.710.951
Table of Contents
Page
List of Tables ........................................................................................................................... vii
List of Figures ......................................................................................................................... ix
Abbreviations .......................................................................................................................... xi
Foreword .................................................................................................................................. xiii
Acknowledgements ................................................................................................................. xv
Executive Summary ................................................................................................................ xvii
1.
2.
Introduction
1.1 Background ...............................................................................................................
1.2 Objectives of the study .............................................................................................
1.3 Structure of the report ...............................................................................................
1.4 Summary of the study on institutions and structure of foreign trade ........................
1.4.1 Reform in foreign trade ....................................................................................
1.4.2 The structure of foreign trade ..........................................................................
1.5 Current issues on institutions and policies ................................................................
Effects of Trade Liberalization on Production, Marketing and Demand of
Selected Commodities
2.1 Trade patterns of selected agriculture commodities .................................................
2.2 Demand, supply, and trade simulation model ...........................................................
2.2.1 Model specification ..........................................................................................
2.2.1.1 Domestic production ............................................................................
2.2.1.2 Domestic demand ................................................................................
2.2.1.3 Stock ....................................................................................................
2.2.1.4 Trade ....................................................................................................
2.2.1.5 Market clearing ....................................................................................
2.2.1.6 Model simulation ..................................................................................
2.3 Welfare analysis ........................................................................................................
2.3.1 Producer welfare ..............................................................................................
2.3.2 Consumer welfare ............................................................................................
2.4 Agricultural production, marketing and trade-related policies .................................
2.4.1 Production growth ............................................................................................
2.4.2 Agricultural development strategy and policies ...............................................
2.5 Effects of trade liberalization at the national level ...................................................
2.5.1 Debate on China’s food economy ....................................................................
2.5.2 Defining projection scenarios ..........................................................................
2.5.3 Impacts of trade liberalization on China’s agricultural prices .........................
2.5.4 Impact of trade liberalization on production, demand and trade
of agricultural commodities .............................................................................
2.5.4.1 Baseline scenario .................................................................................
2.5.4.2 Free trade scenario ................................................................................
2.5.5 Impacts of trade liberalization on China’s grain self-sufficiency ....................
v
1
2
2
3
3
4
5
7
9
9
9
11
13
13
13
14
16
16
18
19
19
21
28
28
30
32
34
34
34
42
2.5.6 Impacts of trade liberalization on agricultural employment and the
welfare of producers and consumers ................................................................ 44
2.5.6.1 Employment ......................................................................................... 44
2.5.6.2 Welfare of producers and consumers ................................................... 45
3.
4.
5.
Effects of Trade Liberalization at the Farm Level
3.1 Selection of location specific agricultural commodities ...........................................
3.2 Methodology .............................................................................................................
3.3 Specification of variable costs and returns ...............................................................
3.4 Partial budget analysis ..............................................................................................
3.4.1 Rice ..................................................................................................................
3.4.2 Wheat ...............................................................................................................
3.4.3 Maize ...............................................................................................................
47
47
48
50
50
52
53
Prospects and Strategies
4.1 Institutions, policy and trade patterns .......................................................................
4.1.1 Reforming China’s external sector ..................................................................
4.1.2 Changing agricultural trade patterns ................................................................
4.2 The impact of trade liberalization .............................................................................
4.2.1 Demand, supply and trade balance ..................................................................
4.2.2 Welfare and employment .................................................................................
4.2.3 Local farmer’s income .....................................................................................
4.3 Policy implications ....................................................................................................
55
55
56
57
57
58
58
59
References ............................................................................................................................... 61
Appendix Tables .............................................................................................................................. 77
vi
List of Tables
Page
Chapter 2
Table 2.1 Exports and imports of selected agricultural commodities (’000 tons) ............... 8
Table 2.2 Growth rate (%) of agricultural economy by sector and selected
agricultural commodity, 1970-97 ........................................................................ 19
Table 2.3 Changing structure of the agricultural economy in China, 1978-96 .................... 20
Table 2.4 Agricultural land use patterns in China, 1978-97 ................................................ 20
Table 2.5 Government investment (billion yuan in 1985 prices) in agriculture, 1965-96.... 22
Table 2.6 Capital flow (billion yuan in 1985 prices) from agriculture/rural sectors
to industry/urban sectors through fiscal, financial and grain
procurement systems ............................................................................................ 22
Table 2.7 Nominal protection rates (NPR) of grain at official exchange rates, 1985-98 .... 26
Table 2.8 Effective real protection rates (ERPR) of grain at real effective exchange rates,
1985-98 .............................................................................................................. 26
Table 2.9 Agricultural research expenditure in China, 1985-96 .......................................... 27
Table 2.10 Agricultural technology extension expenditure in China, 1986-95 ..................... 27
Table 2.11 Impact of trade liberalization on agricultural commodity prices in China
(free trade vs baseline scenarios), 1985-96 ......................................................... 33
Table 2.12 Projection of grain production, consumption and trade under the baseline
scenario (’000 tons), 2000-2005 .......................................................................... 36
Table 2.13 Projection of animal product production, consumption and trade under
the baseline scenario (’000 tons), 2000-2005 ...................................................... 38
Table 2.14 Impacts of trade liberalization (free trade) on grain production, consumption
and trade, 2000-2005 ........................................................................................... 39
Table 2.15 Impacts of trade liberalization (free trade) on animal product production,
consumption and trade, 2000-2005 ..................................................................... 40
Table 2.16 Grain self-sufficiency rates (%) under various scenarios, 1995-2020 ................. 43
Table 2.17 Impacts of the free trade regime on agricultural employment in 2000-2005 ....... 44
Table 2.18 Changes in annual welfare gains (billion yuan in 1995 prices) between the free
trade and baseline scenarios, 2000-2005 ............................................................. 46
Chapter 3
Table 3.1 Partial budget analysis of rice production in China: baseline versus free
trade scenarios .....................................................................................................
Table 3.2 Partial budget analysis of the rice production by variety in China: baseline
versus free trade scenarios ..................................................................................
Table 3.3 Partial budget analysis of wheat production in China: baseline versus free
trade scenarios .....................................................................................................
Table 3.4 Partial budget analysis of maize production in China: baseline versus free
trade scenarios ......................................................................................................
vii
51
52
53
54
viii
List of Figures
Page
Chapter 2
Figure 2.1 Price determination in a subsequent period ......................................................... 15
ix
x
Abbreviations
APEC
CAAS
CAPSiM
CCAP
CG
COFCO
ERPR
ERS
FTCs
GATT
GDP
mt
MOA
NPRs
NRP
RMB
SOE
SSB
TVE
WTO
Asian and Pacific Economic Cooperation
Chinese Academy of Agricultural Sciences
China’s Agricultural Policy Simulation Model
Center for Chinese Agricultural Policy
Coarse Grain
China National Grain, Oil and Food Import and Export Corporation
Effective Real Protection Rate
Economic Research Service of the United States Department of
Agriculture
Foreign Trade Corporations
General Agreement on Tariffs and Trade
Gross Domestic Product
Metric Tons
Ministry of Agriculture
Nominal Protection Rates
Nominal Rate of Protection
Chinese Currency
State Owned Enterprises
State Statistical Bureau
Township and Village Enterprise
World Trade Organization
xi
xii
Foreword
Responding to the growing concern for the effects of trade liberalization on regional
agriculture, the CGPRT Centre has implemented a three-year research project “Effects of Trade
Liberalization on Agriculture in Selected Asian Countries with Special Focus on CGPRT Crops
(TradeLib)” since March 1997, in collaboration with partners from ten countries: China, India,
Indonesia, Japan, Malaysia, Pakistan, the Philippines, the Republic of Korea, Thailand and Viet
Nam. In all these countries, important issues regarding trade liberalization were investigated
with an identical research framework by national experts.
The investigation covers major crops which might receive either favorable or
unfavorable effects of trade liberalization both in export and import. I believe that the project
will provide broad and practical knowledge on various aspects of the effects of trade
liberalization; moreover, the information will be useful for researchers and policy planners not
only in participating countries but also in other countries in the region. However, I would like to
note that, since this project was conceived and started before the current currency and economic
crisis began in the middle of 1997, the analysis handles basically the period before the crisis
with available current information.
I am pleased to publish Effects of Trade Liberalization on Agriculture in China:
Commodity Aspects as the report of the second phase of the country study of China. A report
of the first phase of the country study, which includes institutional and structural aspects on the
same subject, was published recently. I certainly hope these reports will be fully utilized for the
improvement of agricultural trade and the encouragement of regional agriculture.
I thank Dr Jikun Huang and Dr. Chunlai Chen of China for their intensive research and
the Center for Chinese Agricultural Policy for allowing them to work with us and for providing
continuous support. I am very much obliged to Dr Boonjit Titapiwatanakun for his devoted
contribution to the project as the regional advisor. I would also like to express appreciation to
the Government of Japan for funding the project.
Haruo Inagaki
Director
CGPRT Centre
xiii
xiv
Acknowledgements
This is a report of a country study for China under the overall project entitled “Effects of
Trade Liberalization on Agriculture in Selected Asian Countries with Special Focus on CGPRT
Crops (TradeLib)”. It is the second part of the Chinese study focusing on commodity and local
agriculture related to trade liberalization.
The report benefited from fruitful discussions with many Chinese government officials,
the staff of the CGPRT Centre, and the national experts from the 10 Asian countries
participating in this project.
The completion of this report would not have been possible without the assistance from
many officials, who helped in providing data required for this study, from the Ministry of
Foreign Trade and Economic Cooperation, Ministry of Finance, Ministry of Agriculture, and
General Customs Administration.
We wish to express our sincere thanks to Dr. Haruo Inagaki, Director of the CGPRT
Centre, for providing us the opportunity to participate and taking a keen interest in this study.
We also sincerely acknowledge the valuable comments and guidelines of Dr. Boonjit
Titapiwatanakun, Regional Advisor for this project, Dr. Michio Kanai, Project Leader of the
TradeLib project, CGPRT Centre, and Professor Scott Rozelle, of the University of California
at Davis.
We would like to thank all the staff, particularly Professor Ninghui Li, Dr. Dinghuan
Hu, Dr. Ruifa Hu, Dr. Linxiu Zhang, Mr. Fangbin Qiao, Ms. Caiping Zhang, and Ms. Yuxian
Lin in the Center for Chinese Agricultural Policy, Chinese Academy of Agricultural Sciences,
and also Ms. Titiek Pratiwi, secretary of the TradeLib Project, for their assistance in this study.
Beijing, China
June 1999
Dr. Jikun Huang
Professor and Director
Center for Chinese Agricultural Policy
Chinese Academy of Agricultural Sciences
and
Dr. Chunlai Chen
Visiting Research Fellow
Center for Chinese Agricultural Policy
Chinese Academy of Agricultural Sciences
xv
xvi
Executive Summary
Reform and trade liberalization in China’s external sector, because of its strategic role in
the economy, has proceeded gradually. Gradual trade liberalization in step with reforms in the
other sectors of China’s economy has its logic. In the initial stage, reformers only implemented
measures that provided incentives to sets of corporations and institutions and did not alter or
only partially altered the institutional structure that was set up to achieve the objectives of
foreign trade in national industrialization, economic growth, and national security (i.e., food
self-sufficiency in the agricultural sector). As experience gained from the reforms grew and the
objectives of trade could be achieved through alternative settings of institutions and policies,
trade liberalization processed smoothly since the late 1980s.
In the past 20 years, the study (reported in the first part of the project) shows that
China’s foreign trade regime has gradually changed from a highly centralized, planned and
import substitution regime to a more decentralized, market-oriented and export promotion
regime.
The reforms of the economy in general and international trade in particular have
significantly impacted on the economic structure and patterns of international trade in China.
Economic reforms resulted in considerable growth of the national economy and dramatically
changed the structure of China’s economy in general and agriculture in particular. The changing
pattern of comparative advantage within agriculture is consistent with China’s resource
endowments. China was a net exporter of labor intensive and labor/capital intensive agricultural
products, such as horticultural products, animal products and processed agricultural products,
and was a net importer of land intensive agricultural products, such as grains, cotton, and edible
vegetable oils in the past. The study also shows that since 1985, when the external trade reform
was initiated, the patterns of China’s agricultural trade, particularly the patterns of agricultural
exports, have gradually moved more closely towards reflecting China’s resource endowments.
However, this study also reveals that room for further liberalization exists in terms of
limiting non-tariff measures to control agricultural imports, further commercialization of state
trading, and improving the efficiency of foreign trade management. Indeed, China has decided
to take further trade liberalization steps in the coming years. China applied to join GATT and
then the World Trade Organization (WTO) in 1986. Although China has not been accepted as a
member of the WTO, China has committed to comprehensively implementing the Uruguay
Round agreements upon its accession into the WTO.
With 13 years negotiation on China’s WTO accession, particularly the recent progress
made during Premier Zhu Rongji’s visit to the United States in April of 1999, it is likely that a
decision concerning China’s joining the WTO will come soon. The sheer size of China’s
economy and its rapid growth will make China a crucial player in the future development of
world markets for inputs and outputs of food and agricultural products, agribusiness, and
industry.
While the negotiation is still ongoing, there has been also growing concern on the
impacts of China’s accession to WTO on China’s domestic agricultural production, prices and
markets, employment and farmer’s income, particularly in the short term. How to sustain
agricultural growth, achieve food security, and increase farmers’ income with the process of
agricultural trade liberalization are priority concerns of not only policy makers but also farmers.
What are the impacts of trade liberalization on China’s agricultural production? What are the
implications of trade liberalization to China’s food security? How will trade liberalization
impact on China’s domestic agricultural commodity prices, agricultural employment, farmer’s
xvii
income, and agricultural trade in the short run and in the long run? What are the policy
implications of the changes in the economy resulting from trade liberalization in the future?
The answers to these questions are by no means clear. Some researchers claim that the
impacts of China’s accession to the WTO on China’s agricultural production and trade are
marginal. Others believe that while both China and the rest of the world will benefit from
China’s WTO accession for the economy as a whole, the impacts of trade liberalization on
China’s agricultural sector should not be understated.
China’s ability to feed itself in the 21st century has been widely discussed in the
literature. The most striking feature of the projections of food surpluses and deficits is their
wide range. Such a wide range of food economy predictions is perplexing. China’s emergence
as either a major importer or a major exporter could have enormous consequences for world
grain markets and prices. Moreover, most previous studies assume that China’s current trade
policies will be continued in the future. Evidence from most recent work indicates that China
will face great challenge in achieving its food security in a more liberalized economy.
Based on a projection model developed at the Center for Chinese Agricultural Policy
(CCAP), CCAP’s Agricultural Policy Simulation and Projection Model, several policy
scenarios are formulated and the impacts of trade liberalization on China’s agricultural demand,
supply, trade, prices, welfare, employment as well as farmers’ income in local crop production
are projected and estimated.
The scenarios formulated for simulation analysis include baseline, free trade, and free
trade with increasing productivity enhancement investment scenarios. A baseline scenario
assumes that China will continue its current domestic and external policies and not join WTO in
the future. In contrast to the baseline scenario, a free trade scenario assumes that China will
continue liberalizing its agricultural sector and reach a free trade environment for most
agricultural commodities by the year 2005. This represents a maximum impact of trade
liberalization on China’s agriculture. The actual impact of trade liberalization and China’s
joining WTO on domestic agriculture will be in between the simulation results of the baseline
and the free trade scenarios. In order to provide long term prospects on China’s food security
under a free trade regime, we project China’s food supply, demand and trade toward 2020
under a free trade scenario without and with the progressive improvement in agricultural
productivity enhancement investment. The latter scenario assumes that the annual growth rate
of agricultural research expenditure will rise from 4% (baseline assumption) to 6%.
Our simulation results on trade liberalization conclude that the producers of most crops
(except for rice and horticulture) will have reduced income from their farming activities not
only because of a decline in the price received by the farmers, but also a reduction in
production. However, most animal product producers, particularly farmers raising hogs and
poultry, will benefit from trade liberalization as the increase in the export demand raises
livestock prices and the surging maize import lowers the feed price.
The impacts of trade liberalization on China’s agriculture are remarkable not only on
agricultural prices, but also on domestic production and consumption, and external trade. Under
the free trade scenario, the fall in domestic prices of grain raises grain consumption and slows
down the production. Our projection shows that China’s domestic grain production will fall far
behind domestic grain consumption under the free trade scenario. Compared to the baseline
scenario, the grain deficit between domestic supply and demand will be further increased.
China’s net grain imports would rise to about 60 million mt in 2005 if the grain market were
liberalized. Among these, 40 million mt or two-thirds of imported grains are maize.
Our study also concludes that maize, the third major crop just behind rice and wheat,
will soon pass over rice and wheat, and become a top crop in terms of the magnitude of its
domestic consumption (demand), and it will soon become the number one imported crop
product in China. China will likely be one of the world’s largest importers of maize in the
coming years if the market is fully liberalized in the future. In contrast to what many scholars’
xviii
believe, while trade liberalization will raise the wheat import in the short run, the wheat import
will soon decline after the initial shock of trade liberalization. China will become nearly selfsufficient in wheat in the long term (by 2020).
On the other hand, China is likely to be one of the major exporters of livestock products
in the world. Pork and poultry exports will expand profoundly with trade liberalization. Trade
liberalization will tend to raise domestic animal product prices to levels present in the world
market. The interesting point is that feed grain consumers are the animal product producers.
Thus, the producers of animal products will have double gains (lower production cost as the
feed price declines and higher meat prices) with a more liberalized economy. Consequently,
there will be an expansion in the production of animal products, particularly the production of
pork and poultry in China after trade liberalization.
In relation to food security and grain self-sufficient issues, our study shows that a
completely liberalized economy in the short term will challenge the current food security goal
defined by the government. China’s grain self-sufficiency rate will decline rapidly from 98% in
the mid-1990s to less than 90% in 2005 if the free trade regime is assumed by the year of 2005.
However, it is worth noting that this is an extreme case, representing a maximum impact of
trade liberalization on China’s grain economy. The actual impact of China’s joining the WTO
will be lower than the results from this free trade scenario.
In the long term, our study shows that the most effective policy that could improve
China’s food security and raise the grain self-sufficiency level is to increase agricultural
productivity enhancement investment such as agricultural R&D, rural and agricultural
infrastructure and irrigation. If these policies are formulated properly, China could achieve its
grain self-sufficiency target in the second decade of the next century, even if the grain market is
completely liberalized in 2000-2005.
The welfare analysis of this study reveals that trade liberalization will generally be
unfavorable to grain producers but favorable to livestock and fish producers in China. In terms
of consumers, trade liberalization will raise their welfare in grain, but reduce their welfare in the
meat sector. For overall social welfare, our study shows that social welfare gained from the
liberalization within China’s agricultural sector is minimal. However, the welfare changes differ
significant among agricultural products, between producer and consumer, and over time.
The impacts of trade liberalization on agricultural employment in this study are
surprisingly lower than those found in other studies for China, but they are consistent with the
actual employment changes observed in Mexico and other developing countries during the
period when their economies were liberalizing. However, a significant impact of trade
liberalization is found for maize and wheat. Maize production would lose employment by more
than 2.3 million man-years and wheat by 1.14 million man-years in 2000-2005. The
employment expansion in the rice and livestock sectors will not be able to fully offset the
decline in employment in the crop sector. For agriculture as a whole, a rough estimate of the
reduction in employment due to trade liberalization might range from 2 to 2.5 million manyears in the period of 2000-2005.
Examination of the impacts of trade liberalization at the local farm level is based on a
partial budget analysis for rice, wheat and maize, the three most important crops in China. The
results show that rice farmers in China will be one of the few winners within the agricultural
sector in the process of trade liberalization. The gains come essentially from the rise in the
domestic rice price and the reduction in production costs as most agricultural input prices will
fall with trade liberalization. These gains from liberalization are found for all rice producers in
China, but the gains vary among provinces and by variety.
The partial budget analyses also demonstrate that wheat and maize production would be
much less profitable after trade liberalization. Farmer’s income from wheat and maize
production will decline significant with trade liberalization, as the large decline in output prices
xix
could not be compensated for by the cost reduction from cheaper imported agricultural inputs.
Most maize and wheat farmers in southern China might record a negative profit if the
opportunity costs of family labor are accounted for in crop production.
Based on the findings of this study, a number of policy recommendations are made in
the last section of this report. The study calls for a greater role for the market to determine trade
patterns in order to reap comparative advantage gains in the course of trade liberalization.
Policy steps to achieve comparative advantage gains include removing implicit taxes on farmers
and reforming domestic grain pricing and marketing systems.
Further commercialization of the state trading system will improve the efficiency of
foreign trade under a more liberalized economy, which is essential for China to maximize its
potential gains in some sectors and/or to minimize its likely losses in other sectors of the
economy due to trade liberalization. Improved grain handling, internal transport, and external
port capacities will be the other important areas for policy intervention.
This study also calls for a revision of the grain self-sufficiency policy. If a food grain
self-sufficiency concept could be adopted by policy makers instead of the total grain selfsufficiency concept, China would benefit greatly from realizing the full gain in trade
liberalization by shifting more land from the productions of feed grain to exportable products
(i.e., horticultural products).
To maintain a high level of food security and to ensure that the comparative advantage
of China’s agriculture does not decline as far as we have projected under the free trade scenario,
China has to substantially raise its investment in agricultural research and extension, irrigation,
and other productivity-enhancing activities. This is one of the most effective measures to reduce
China’s grain imports and expand labor intensive agricultural product export.
Policies recommended for China to minimize its short term shocks from trade
liberalization include measures that could be adopted under the WTO framework such as setting
an adequate minimal market accession level, a reasonable level of the above quota tariffs, an
acceptable length of the transition period, and a moderate depreciation of the domestic
currency.
New policies on assisting farmers in adjusting their production and employment
structures, and on setting up a better tax and income re-redistribution system are also suggested.
This is particular important for the poor whose income mainly depends on crop production.
Access to credit and market information is another important factor that will help farmers obtain
re-employment in other sectors. A further effort is needed to assess the consequence of trade
liberalization on China’s agriculture and farmer’s income in a more detailed manner and to
increase the awareness of policy makers and farmers regarding China’s agriculture and the trade
liberalization.
xx
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