Agriculture Reference
In-Depth Information
all agrcultural products. We examne these two possble polcy scenaros
by constructng alternatve smulatons of the 2010 global and Chnese
economies. In the first, for import-competing agricultural products,
the self-sufficiency ratio is held constant at the 2001 level through the
mplementaton of a source-generc tarff n each sector that s addtonal
to existing protection. In the second, these sectors are made to return to
full self-sufficiency by 2010 through the more zealous application of such
tariffs. The results from these simulations are presented in Table A8.7. To
show ther power the addtonal tarffs requred are lsted n the form of
proportional changes to nominal protection coefficients (ratios of domestic
post tarff to border prces).
Because the declines in self-sufficiency projected to 2010 are significant,
the tariffs necessary to retain 2001 self-sufficiency rates are substantial,
particularly for the beverages, 'other crops' and livestock product groups.
These taxes on imports are, in fact, taxes on all China's trade which not only
reduce food imports. They also reduce China's exports, causing exporting
industries to contract. Overall, the increased protection induces a one per
cent contracton n GDP along wth some restructurng across ndustral
sectors, favouring the newly protected agricultural industries mostly at
the expense of manufacturng.
When the addtonal tarffs are rased to levels that yeld full self-
sufficiency in the previously import competing agricultural sectors, further
substantial changes occur. The tariffs required by 2010 are very large,
particularly on imports in the livestock products, processed food and
'other crops' groups. These distort incentives in the economy substantially,
shftng resources nto agrculture and contractng both the manufacturng
and service sectors, the latter being the primary growth sectors in the
economy. Throughout the economy this decline in allocative efficiency
reduces returns to nstalled captal and therefore nvestment. The level
of 2010 GDP s lower by nearly 2 per cent.
The role of the ncreased tarffs n reducng both mports and exports
is clear from Table A8.8. The tariffs that would achieve agricultural self-
sufficiency in 2010 also reduce exports from China's growth powerhouse,
its light manufacturing industries, by half.
19
Whle ths change s necessary
to retain a balance of payments, the mechanism through which it
operates is the response of firms and households to the domestic price
