Agriculture Reference
In-Depth Information
important intermediate inputs of processed food. Therefore, because the
cost reduction on intermediate inputs is dominant, the combined effects
of the EHP reduce the production costs of these commodities in China.
The changes in production reflect the combined changes in sectoral
exports and mports and domestc consumpton resultng from the
removal of trade barrers. The drvng force underlyng such change s the
comparative advantage in each region. It is clear that the EHP will shift
the prmary nput factors nto the agrcultural sectors experencng tarff
reductions. As shown in Table 13.6, all the industrial and other agricultural
sectors without tariff reductions will shrink in ASEAN. It is, however, a
little different for China. The production of processed food, textiles and
apparel expands margnally due to enhanced compettveness arsng from
ther fallng output prce.
Increases in the output of the commodities listed in the EHP are not,
however, assured. Two factors will determine changes in production: the
first is competition from China's trading partners. Taking vegetables and
fruits in China, for example, although production will increase by 0.3 per
cent due to ASEAN's import tariff reduction, the increasing competition
nduced by Chna's tarff reducton wll reduce producton by 0.4 per cent.
Therefore, the total effect on China's production of vegetables and fruits
s a declne of 1 per cent. The second factor s competton among sectors
for lmted resources. If more producton factors are drawn nto sectors
experiencing strong expansion, the production of other sectors could
be undermined. Taking the milk sector in China, for example, as ASEAN
Table 13.5 Changes in bilateral trade flows (US$ million)
Chna
Old ASEAN
New ASEAN Other regons
Exports
Chna
266
51
-41
276
Old ASEAN
465
-118
-6
-220
121
New ASEAN
127
-12
0
-58
59
Other regons
-296
-54
4
176
-169
Imports
297
83
49
-143
Source:
Results of authors' smulaton.
