Agriculture Reference
In-Depth Information
Conclusion
A global comparatve statc model s used to project the world economy to
2010, noting the trends in the self-sufficiency rates for agricultural products
in China. If there is no change in China's trade policy regime, agricultural
self-sufficiency rates are shown to decline and this decline is shown to
be significant in all agricultural sectors except fisheries. Large changes in
protection would be needed to hold the line at 2001 self-sufficiency levels.
To achieve full self-sufficiency in all agricultural products by 2010 substantial
further new protecton would be requred. Ths protecton would be both
contractionary and redistributive, harming worker households and retarding
growth in the modern sector of China's economy. Moreover, it would
raise domestic prices of food in China, restricting the availability of food
products. This, plus slower growth, seems a high price to pay for a modest
reducton n Chna's nterdependence wth nternatonal markets.
Because livestock products, as a group, are very income elastic, these
results prove to be partcularly senstve to ther ncome elastcty of
demand. Ths elastcty has receved less attenton from the consumpton
literature than others, particularly that of rice, yet small changes in it lead
to substantially different projections of agricultural self-sufficiency rates,
the tariffs required to achieve self-sufficiency and the export performance
of the modern sector of the economy. Further analysis of the consequences
of any move to achieve and maintain agricultural self-sufficiency in China
needs to be nformed by new and hgh qualty estmates of ths and related
ncome elastctes.
Finally, we note two downward biases in our estimation of the economic
costs of achieving self-sufficiency. First, the links between productivity
growth and trade reform are ignored, so that when new protection is
applied with the objective of achieving agricultural self-sufficiency, no
associated sacrifice of total factor productivity is imposed. Second, even
though we have recalibrated the standard GTAP CDE demand system, the
range of ncome elastctes between the superor food tems n 'processed
food' and 'lvestock products' on the one hand and cereals on the other
s stll lkely to be smaller than n realty. As the senstvty analyss
suggests, the economic costs of a tariff regime to restore self-sufficiency
are substantally hgher f the ncome elastcty of demand s rased above
