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The Effects of Trade liberalization on China’s Agriculture and Poverty

IAAE conference, 2009, Beijing. The Effects of Trade liberalization on China’s Agriculture and Poverty. Jun Yang, Jikun Huang and Huanguang Qiu Center for Chinese Agricultural Policy, Chinese Academy of Sciences. Outline of the presentation.

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The Effects of Trade liberalization on China’s Agriculture and Poverty

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  1. IAAE conference, 2009, Beijing The Effects of Trade liberalization on China’s Agriculture and Poverty Jun Yang, Jikun Huang and Huanguang Qiu Center for Chinese Agricultural Policy, Chinese Academy of Sciences

  2. Outline of the presentation • Brief Introduction on the Structural Change of China’s Agriculture • Change and Characteristics of China’s Agricultural Trade • Trade Liberalization in Agricultural Sectors • Impacts of Trade Liberalization on China’s Agricultural Production and Farmer’s Income • Concluding Remarks and policy implications

  3. Brief Introduction on the Structural Change of China’s Agriculture

  4. Less than 1$/day in PPP Less than national Poverty level China’s Economic growth and Poverty Alleviation GDP: increased by 14.1 times, annually by 9.8% during 1978-2007 Poverty incidence: 32% in 1978 （250 million） 2.8% in 2006 (20 million）

  5. Significant Changes in the structure of China’s Economy (%) Agricultural GDP share: 30% in 1980  11% in 2007 Crop share: 76% in 1980  52% in 2007 Cash crops: 32% in 1980  44% in 2007

  6. Share (%) of rural population living under official line… varies substantially across provinces (2005) Source: Estimated based on rural income and expenditure survey conducted by National Bureau of Statistics of China in 2005

  7. China is a big country, production differs largely among regionsThe share of provincial pork production in China (%)

  8. 2. Change and Characteristics of China’s Agricultural Trade

  9. China’s Agricultural trade during 1992-2006 China’s WTO accession

  10. China's Agricultural Exports by Categories(at constant 2000 US$ price) Shares in 2006: Processed food: 46%, Animal products, 24%, Horticultural products, 22%; cereal, oilseeds and veg. oil, 8%; Raw materials for textile, 1%

  11. China's Agricultural Imports by Categories(at constant 2000 US$ price) Shares in 2006: Cereal, oilseeds and veg. oil, 39%; Raw materials for textile, 25%; Animal products, 16%,Processed food, 14%, Horticultural products, 6%.

  12. Shares of China's Agricultural Exports byCommodity Groupings (%)

  13. Shares of China's Agricultural Imports byCommodity Groupings (%)

  14. The Change of China’s agricultural trade(net export, billion US）

  15. 3. Trade Liberalization in Agricultural Sectors

  16. China’s import tariff on agricultureBefore WTO accession: 1992-2001: 42.2% 21%After WTO accession: 2001-2004: 21%-17%

  17. Nominal protection rates (%) in China, 1980-2005 Source: Huang et. al., 2007

  18. Import tariff rates on major agricultural products subject to tariff-only protection in China

  19. China’s average applied tariff and tariff levied on China’s export of agricultural products in 2005（%） Source：GTAP database and China’s WTO commitments

  20. 4. Impacts of Trade Liberalization on China’s Agricultural Production and Farmer’s Income

  21. Impacts of China’s WTO accession

  22. Impacts of WTO on agricultural output values on poor, median and richest farmers in 2005(yuan/household) Yuan About 5% of agricultural output values

  23. Regional agri production structure in 2001: Exportable output % Importable output %

  24. Impacts on agri. output for average farm by province in 2005 (%)

  25. Impacts by China’s WTO accession on agricultural output for average farm (%)

  26. Impacts of Doha trade liberalizations

  27. Impacts on per capita agricultural income in rural area by income groups under USA proposals in 2015

  28. Impacts on per capita agricultural income for average farmers under USA proposal in 2015(yuan/person)

  29. Impacts on per capita agri. income for the farmers under poverty by province under USA proposals in 2015 (yuan/person)

  30. Impacts on per capita agri. income for average farmers with special products in 2015 (comparing to "Doha without special products", yuan/person)

  31. Impacts of FTAs

  32. Economic impacts of FTAs on China (comparing to the baseline, 2015)

  33. Concluding Remarks (1) • After three decades trade liberalization, China has became one of the most liberalized countries in agricultural trade in the world… • China’s agricultural trade is adjusting towards its comparative advantage… • Under a more liberalized economy, China needs to continue to restructure its agriculture in favor of labor-intensive products(need to continue to restructure its extension system; improve technologies in these new areas; raise capacity of farmers to compete) and support those who may be hurt from Doha Round.

  34. Concluding Remarks (2) • The impacts will vary significantly under different policy arrangements… • Impacts of Doha Round differ from China’s WTO accession. • WTO accession - mostly unilateral cuts imposed on China … other nations did not change very much … • Doha liberalization--Multilateral liberalization… Distortions in China are so low, compared to ROW, farmers, on average, benefit in a relative sense • Impacts on different commodities also vary remarkably by FTAs with different countries…

  35. Concluding Remarks (3) • Impacts of Doha trade liberalization on poverty… • Doha Round is likely to improve China’s food security and reduce rural poverty [although impacts are small, the net effects are positive; not adverse] • Farmers in most provinces will gain from Doha Round [with exception of a few] • Richer farmers (because they are producing more competitive crops) will gain more than the poor  therefore, income disparity (within region) may be enlarged with Doha Round

  36. Concluding Remarks (4) • Impacts of Doha trade liberalization on commodities… • For commodities in which China does not have a comparative advantage (e.g., maize and wheat), the Doha requirement to reduce both subsidies and tariffs in ROW means China (while still importing) will import less (because world price rises) • For some commodities (e.g., sugar and milk), which did not liberalize much in WTO accession, will likely be liberalized more  meaning there will be negative impacts for farmers of these commodities

  37. Concluding Remarks (5) • China has taken active role in the Doha round of talks, China should take a more active role in the future… • China should also pay particular attention to NTB/SPS issues (e.g, raise its capacity for dispute settlement; improve food safety and quality)

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