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The Chinese Market For U.S. Pork Exports

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  • Hayes, Dermot J.

Abstract

China feeds twenty-two percent of the world's population on seven percent of its arable land. In contrast, the U.S. and Canada own seventeen percent of the world's arable land, but feed only five percent of its people. As China's income increases, its people will demand more livestock products, including poultry, dairy, beef, and eggs, and more alcohol. Potential Chinese import demand for pork is examined in this paper. The question facing Chinese policymakers is whether to follow their current policy of food self-sufficiency or allow imports of pork muscle and variety meats. Projections of Chinese production and consumption indicate that, by the year 2007, China could import up to 9.1 million metric tons (product weight equivalent) of pork. The current Chinese government is very opposed to food imports of any kind. However, China has applied for entry into the World Trade Organization. Negotiations on China's entry could include access to China's pork market, and it is most likely that access could be gained to the variety meat market. The implications of two opposing scenarios are examined in this paper: first, China continues its policy of self-sufficiency; or second, China allows imports of pork variety meats. Self-Sufficiency Scenario: The anticipated increase in livestock production will cause feed grain consumption in China to increase more rapidly than production. Once China becomes a permanent net importer of feed grains, its prices will rise to reflect world feed grain prices plus transportation costs. This development will make China's pork products more expensive than imports. This simple line of argument means that China is about to modernize and expand the world's largest pork industry in the wrong place. Expanding pork production in China instead of allowing imports from efficient producers will cause an enormous misallocation of world resources. The Chinese people would benefit more if China concentrated on labor intensive crops and allowed for the free importation of livestock products. Import Access Scenario: Where the pork market is concerned, U.S. and Chinese consumers complement each other. Chinese people like variety meats, whereas U.S. consumers prefer pork muscle meats. Because of its dominance in the world market, China would be able to determine world prices if it allowed free importation of variety meats. The drop credit, which is the value of the pork variety package, is estimated to increase by 45 percent. However, the increase in the value of the pork variety package would not imply an increase in prices in the U.S. domestic market which largely consumes pork muscle meats. Implications for U.S. Producers: Even if China does not allow imports of pork, U.S. producers will still benefit from increased Chinese demand. Due to projected increased consumption over the next ten years, it is likely that China will stop exporting its current level of 150,000 to 200,000 tons of pork muscle meat. If China does allow free importation of pork variety meats, the increased value of the U.S. drop credit would add $4.72 to the value of each hog carcass or about $1.90 per hundredweight. For the U.S. pork industry, the net annual benefit of access to the Chinese market would be approximately $300 million per year. Hayes argues that opening this market may be feasible as part of negotiations over China's entry to the World Trade Organization. Regardless of how Chinese pork market policy evolves, the demand for U.S. feed grain will increase, causing some movement of land in the U.S. from wheat production into feed grain production.

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Bibliographic Info

Paper provided by Montana State University, Department of Agricultural Economics and Economics in its series Trade Research Center Policy Issues Papers with number 29173.

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Date of creation: 1997
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Handle: RePEc:ags:motpip:29173

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Related research

Keywords: China trade; livestock; feedgrains; meat; International Relations/Trade; F1;

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References

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  1. Ian Shaw & John Shaffer & V. Premakumar, 1997. "Policy and Forecasting Models for the Chinese, South Korean, Australian, and European Union Meat Sectors," Food and Agricultural Policy Research Institute (FAPRI) Publications 97-tr35, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  2. Ian Shaw & John Shaffer & V. Premakumar, 1997. "Policy and Forecasting Models for the Chinese, South Korean, Australian, and European Union Meat Sectors," Center for Agricultural and Rural Development (CARD) Publications 97-tr35, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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Cited by:
  1. Fuller, Frank H. & Beghin, John C. & Fabiosa, Jacinto F. & Fang, Cheng & de Cara, Stephane & Matthey, Holger, 2001. "China'S Accession To The World Trade Organization: Impact On Agricultural Markets," 2001 Annual meeting, August 5-8, Chicago, IL 20619, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Wang, Qingbin & Zhang, Guangxuan, 2012. "China’s small-scale hog production and implications for trade: Evidence from a farmer survey," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125288, Agricultural and Applied Economics Association.
  3. Metcalfe, Mark R., 2000. "Environmental Regulation And Implications For U.S. Pork Exports," 2000 Annual meeting, July 30-August 2, Tampa, FL 21808, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Metcalfe, Mark R., 2001. "Environmental Regulation And Implications For Competitiveness In International Pork Trade," International Trade in Livestock Products Symposium, January 18-19, 2001, Auckland, New Zealand 14565, International Agricultural Trade Research Consortium.
  5. Cheng Fang & Frank H. Fuller, 1998. "Feed-Grain Consumption by Traditional Pork-Producing Households in China," Center for Agricultural and Rural Development (CARD) Publications 98-wp203, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  6. Cheng Fang & Frank H. Fuller, 1998. "Feed-Grain Consumption by Traditional Pork-Producing Households in China," Food and Agricultural Policy Research Institute (FAPRI) Publications 98-wp203, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.

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