China's WTO Commitments in Agriculture: Does the Impact Depend on OECD Agricultural Policies?

This study provides a preliminary assessment of the potential effects of implementing China’s WTO agricultural commitments. Particular attention is given to the integration of the actual commitments into the global GTAP database and to the explicit modeling of the newly introduced Tariff Rate Quotas for major crops. The results show that China’s import of agricultural commodities will increase (in particular the imports of grains), and that in general there will be a slight contraction of output and a modest expansion of export in agriculture. The impact on the Chinese welfare is limited as the positive efficiency gains are negated by a terms of trade loss. Although the results found seem to generate an unfavorable picture for the Chinese agricultural sectors in the short run, this is by no means as alarming as feared by some observers. To explore the perspectives of Chinese agriculture in the continued multilateral agricultural negotiations, we further conduct a few counterfactual scenarios. The simulations clearly illustrate that many of the negative effects on China caused by the implementation of the WTO deal can be limited if the more protectionist rich countries take action to reform their agriculture policies. The scenarios on reforming domestic supports and market access in three rich economies show that, although they produce differential impacts, both of them affect the results non-negligibly. Therefore, continued agriculture liberalization requires paralleled efforts in both these two areas in the OECD countries.