Agricultural Protection And Market Integration In China:Implications Of China's Accession To WTO

In the negotiation process of accession to WTO, China made substantial commitments. It is hypothesized that with the import of foreign agricultural products at lower prices after Chinese accession to WTO, negative impacts will be imposed on farmers' income and poverty reduction.Whether the above possibility will occur or not depends largely on the extent of Chinese domestic markets are affected. This study first will estimate the extent of "shock" imposed by Chinese accession to WTO on agricultural products at the border in China, by studying on nominal protection rate (NPR). Secondly, the study also aims at studying market integration of the agricultural products between inland and coastal China.Using the data collected, The primary data in 2001 are collected. The estimation of NPR is conducted in light of the identical quality of the same products at a precise point time in the same place, differentiating the export products and import products. Results of this study show that negative NPR exists in labor-intensive animal products, therefore, these products have comparative advantages. However, a positive NPR was estimated by Chinese grain products and thus these products are in disadvantageous situations. These findings are consistent with resource endowment in China. It is also found that impacts of traditional trade policies such as tariff, quotas and licensing, state-trading become less and less restrict. Such policy instruments as over-estimated exchange rate, tax rebate and subsidies as well as value-added tax for importation have replaced above traditional policies. Combined with commitment made by Chinese government for the accession to WTO, the study also shows that negative impacts will be imposed on land-intensive agricultural products including wheat, soybean, corn, sugar and vegetable oil. However, the impacts will not be as significant as many people estimated. Japonica Rice produced in northern China, beef and chicken are expected to have more obvious comparative advantages.Furthermore, the study used grain as an example to explore the market integration of rice, soybean, and corn in long term (from 1995 to 2000) and in short term (in a single year) based on data collected on these products' price during the period between 1995 and 2000. The results indicate that the markets for these three products are completely integrated in long term and integrated at high level in short term. These results imply that price "shock" occurred in border areas can be transmitted immediately to most inland markets with both positive and negative impacts on farmers' income. However, the impacts with a given quantity will be spread and shouldered by much more areasthan that in a poor integration. Therefore, the impacts imposed on the whole agricultural sector will be attenuated and less than what people estimated.