Achieving food security in China - Agriculture and Food Security in China - page 6

Because the declines in self-sufficiency in the base-case projection 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 (see Table 1.2). These taxes on imports are,
effectively, taxes on all China's trade; thus, they also reduce China's
exports, causing exporting industries to contract. Overall, the increased
protecton nduces a 1 per cent contracton n gross domestc product (GDP)
along wth some restructurng across ndustral sectors. The more heavly
protected agricultural industries are favoured, mostly at the expense of
manufacturing, particularly light manufacturing.
The additional tariffs required to achieve full food self-sufficiency by
2010 are very large, particularly on imports in the livestock products,
processed food and 'other crops' groups (see Table 1.2). These tarff
increases distort incentives in the economy substantially, shifting resources
nto agrculture and contractng the manufacturng and servce sectors.
Throughout the economy, this decline in allocative efficiency reduces
returns to nstalled captal and therefore nvestment. The level of 2010 GDP
s reduced by nearly 2 per cent. The tarffs that would acheve agrcultural
self-sufficiency in 2010 reduce exports from China's growth powerhouse—its
light manufacturing industries—by half. Domestic resources are reallocated
to the agricultural sector, raising costs in manufacturing and reducing the
nternatonal compettveness of Chna's manufacturng ndustres. The
resultng msallocaton of labour s partcularly strkng. The hgher tarffs
cause employment n agrcultural and food-processng actvtes to be
substantially greater, at the expense primarily of light manufacturing.
Higher agricultural tariffs raise land rents by a considerable margin but
reduce real wages and captal returns. Real wages grow less n agrculture
and in the modern sector. This is true for production and skilled workers,
and t s also true for the owners of physcal captal. The captal losses
occur because the ndustres that are hurt by the tarffs are more captal
intensive than agriculture. In the end, landholders are the only winners
from the tarffs.
We might well ask: what is gained by self-sufficiency? Would food be
more readly avalable n Chna? No! Chna's 2010 prces for mported foods
would be ncreased by up to 60 per cent because of the ncreased tarffs;