Agriculture Reference
In-Depth Information
gran s derved n Table 5.7 under an assumpton of a negatve change n
grain stocks by 20 million tonnes. Under these calculations, the tariff quota
(2004) for mported gran at the 1 per cent tarff rate accounts for about
12 per cent of the domestc market.
The mpact on domestc gran prces
In estimating the impact of the WTO import quota on the domestic prices,
we may consider two possible situations. First we may assume that the 22
mllon tonnes of gran mports s an external shock at a tme when the
domestc market s n equlbrum. The domestc equlbrum prces are
based on the calculaton n Table 5.4 wth a 15 per cent ncrease to nclude
the domestic purchase, transport and wholesale costs. In this situation,
the wholesale prce of rce before the shock wll be 27 per cent lower
than for mported rce (but the average qualty of domestc rce s also
lower). Prices of wheat, corn and soybean before the shock will be higher
than the imported prices by 24 per cent, 49 per cent and 51 per cent,
respectively. In this situation, we may assume that the entire wheat and
corn quotas, and 50 per cent of the rice quota, will be used. Altogether,
these sum to 19.5 million tonnes. If we include other grains (for example,
soybean imports may increase dramatically), total grain imports in 2004
could be above 21 million tonnes, that is, an increase of 18 million tonnes
from an average 3.47 million tonnes between 1998 and 2000. This equals
9.6 per cent of the market demand and 4.4 per cent of total demand. (By
the same calculation, imports will be around 17 million tonnes in 2002 and
19 million tonnes in 2003.)
Gran consumpton n Chna s prce nelastc. Based on estmatons of
China's grain demand elasticity in the literature, the author uses 0.37 as
the weighted average elasticity of total demand for grain (alternatively, we
could use 0.81 as the elasticity of market demand, which can be derived
from the rato between total demand and market demand).
9
The prce
effect of the 18 million tonnes of imports will lead to a 12 per cent decline
of prces n the domestc market.
As an alternative situation (but more likely to be true), the external shock
comes when the domestc market s still in surplus. In this case, the domestic
prces of rce and wheat before the shock wll stll be lower than the mported
