Some support policy options for cotton in China

Purpose - The purpose of this paper is to review the economic arguments for and against raising the tariff on imports of cotton into China. Design/methodology/approach - The paper reviews first the possible arguments for raising the tariff, and particularly the possibility that such an increase in tariffs would have a favorable distributional effect by redistributing from those involved in the production of textiles and clothing to the producers of cotton. The core analysis of the paper examines the policies in place using descriptions of policies and interviews with policymakers. It also assembles statistics designed to assess the export status of cotton, whether in raw or processed form. Findings - The paper reviews the situation with respect to WTO commitments and confirms that such an increase, up to 40 percent, would be permitted under WTO rules. The paper then examines other constraints on the effective use of such higher tariffs on cotton. Policies that are better than tariff increases in dealing with the serious problems of rural incomes are identified. Research limitations/implications - The paper is unable to assess the distributional impacts of an increase in the tariff on cotton. It raises a number of cautions about the issues that need to be confronted in making such an assessment. Originality/value - The issue of raising the tariff on cotton has been a subject of intense debate in China and this paper is intended to provide an input into this debate. The paper agrees that urgent action is clearly needed to mitigate the poverty problems in rural China, but concludes that a number of policy options appear likely to be more effective in dealing with these problems than protection of cotton.