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Trade policy responses to food price rises and implications for existing domestic support measures: the case of China in 2008

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  • Yu, Wusheng
  • Jensen, Hans Grinsted

Abstract

Existing literature on the 2007/8 food price crisis focuses on the causes and poverty and hunger consequences of the crisis and seems to be less concerned with the interactions of different policy measures applied by governments. As such, the relative effectiveness, interactions and costs of these policy actions are often not satisfactorily explored. This paper provides a first preliminary quantitative assessment on the individual and joint effects of China’s short term trade policy actions and existing domestic support measures on domestic market prices, outputs, trade flows and farm income, using a global CGE model characterized with detailed and up-to-date policy information for China in the year of 2008. A series of interesting results emerge from our simulations. First, China’s agricultural outputs for many products are estimated to be boosted by up to 1.8 percentage by all the policy interventions combined, indicating that the extra domestic support in 2008 (relative to the pre-crisis level) is able to compensate for the lowered outputs due to the short term trade policy measures. The most stringent export restriction placed on wheat, however, reduces agricultural incentive so much that the observed domestic support measure is not able to compensate the lost domestic production. Second, while both the short term trade policy measures and existing domestic measures are able to reduce domestic market price, roughly two-thirds of the price reductions are due to the increased spending on the domestic measures. Third, the domestic market price reduction effects of the observed policy measures are shown to be large and significant, relative to the observed agriculture and food price indexes in China in 2008. Lastly, while China seems to be quite successful in tackling the food price inflation issue using a combination of policy measures, the fiscal and efficiency costs are not negligible, especially if one considers the extra government spending on the input subsidies necessitated by the insulating trade and border policy measures.

Suggested Citation

  • Yu, Wusheng & Jensen, Hans Grinsted, 2011. "Trade policy responses to food price rises and implications for existing domestic support measures: the case of China in 2008," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115970, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae11:115970
    DOI: 10.22004/ag.econ.115970
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    Cited by:

    1. Wusheng Yu & Jayatilleke Bandara, 2017. "India's Grain Security Policy in the Era of High Food Prices: A Computable General Equilibrium Analysis," The World Economy, Wiley Blackwell, vol. 40(8), pages 1547-1568, August.
    2. Jingdong Li & Weidong Liu & Zhouying Song, 2020. "Sustainability of the Adjustment Schemes in China’s Grain Price Support Policy—An Empirical Analysis Based on the Partial Equilibrium Model of Wheat," Sustainability, MDPI, vol. 12(16), pages 1-22, August.
    3. Wang, Ying & Bilsborrow, Richard E. & Zhang, Qi & Li, Jiangfeng & Song, Conghe, 2019. "Effects of payment for ecosystem services and agricultural subsidy programs on rural household land use decisions in China: Synergy or trade-off?," Land Use Policy, Elsevier, vol. 81(C), pages 785-801.
    4. Yang, Fan & Urban, Kirsten & Brockmeier, Martina & Bekkers, Eddy & Francois, Joseph, 2016. "Impact of Increasing Agricultural Domestic Support on Food Price Transmission," Conference papers 332806, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Bowen Chen & Nelson B. Villoria & Tian Xia, 2020. "Tariff quota administration in China's grain markets: An empirical assessment," Agricultural Economics, International Association of Agricultural Economists, vol. 51(2), pages 191-206, March.
    6. Jie Lyu & Xiaolei Li, 2019. "Effectiveness and Sustainability of Grain Price Support Policies in China," Sustainability, MDPI, vol. 11(9), pages 1-13, April.
    7. Yi, Fujin & Sun, Dingqiang, 2014. "Grain Subsidy, Liquidity Constraints and Food security—Impact of the Grain Subsidy Program on the Grain-Sown Areas in China," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169779, Agricultural and Applied Economics Association.
    8. Jing Zhu & Wusheng Yu & Junying Wang & Christian Elleby, 2016. "Tariff Liberalisation, Price Transmission and Rural Welfare in China," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(1), pages 24-46, February.
    9. Pieralli, Simone & Dominguez, Ignacio Perez, 2017. "The Uncertain Effects of Chinese Policy Reforms on Maize: The Return of China as a Maize Exporting Giant?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258106, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Demand and Price Analysis; International Relations/Trade;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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