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GTAP Resource #3593

"Trade policy responses to food price rises and implications for existing domestic support measures: the case of China in 2008"
by Yu, Wusheng and Hans Grinsted Jensen

Existing literature on the 2007/8 world 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. Using a global CGE model characterized with detailed and up-to-date policy information for China in the year of 2008, this paper provides a first quantitative assessment on the individual and joint effects of China’s short term trade policy actions and existing domestic support measures.

A number of results emerge from our simulation exercises. First, China’s grain outputs are estimated to be boosted by up to 4 percentage by all the policy interventions combined, with increased spending on existing domestic support (relative to the pre-crisis level) is able to compensate for the lowered outputs due to the short term trade policy measures. Second, while both types of policies reduce domestic market price, roughly two-thirds of the price reduction effects are due to the increased spending on the domestic measures. Third, input-based domestic support and export restriction measures on fertilizers both contribute to increasing grain outputs and reducing their domestic market prices; but they generate offsetting output and price effects on fertilizer itself. Fourth, the overall domestic market price reduction effects achieved are shown to be large and significant, relative to the observed price indexes in China in 2008, indicating that in the absence of these policy actions, domestic market price could have risen much more. However, this success comes with non-negligible fiscal and efficiency costs, especially considering how the short term trade policy measures seemingly necessitated the extra government spending on the input subsidies and how these increased subsidies generated very little increase in farm income, which has long been considered a major long term policy goal.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
Date: 2011
Created: Yu, W. (4/15/2011)
Updated: Jensen, H. (6/5/2014)
Visits: 1,896
- Agricultural policies
- Asia (East)

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