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International trade - Essay Example

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Executive summary The implications of China joining the WTO in the Chinese agricultural sector are not easy to establish. This is due to the nature of China’s protectionist strategies, implemented to deal with the issue of food security. China is among the developed countries that have got high tariffs in the agricultural sector…
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International trade

Download file to see previous pages... In essence, China’s strategy of protecting the domestic agricultural sector can be seen as an attempt to restrict the importation of agricultural goods from other countries. Different economic models used to analyze the Chinese agricultural sector such as GTAP do not contain any reliable information on the effects of high tariff rates on the Chinese economy. However, several studies have shown that the WTO accession would have positive effects on the Chinese economy. Many economists have asserted that the removal of tariffs and subsidies will have an impact in the production and trade of agricultural goods in the country. Further, several studies on the Chinese agricultural sector show that the country’s agricultural policies have made agricultural producers spend more time in the production of more valuable crops such as wheat, corn and oil seeds as opposed to crops such as fruits and vegetables. It is evident that these policies are aimed at making China self sufficient in the production of wheat, corn and oil seeds. However, several economists have suggested that these policies are extremely expensive to the economy since the prices of most Chinese agricultural products are above the prices in the international market. The policies put in place by the government hinder resources from benefiting some of the most influential sectors of the economy such as agriculture. International Trade Background Information The common accord, instituted in 1978, that was aimed at opening up the Chinese economy was a significant factor in invigorating the country’s economic growth. Faster economic success is normally followed by a relative decrease in the agricultural sector. However, in China, this was initially affected by the implementation of the agricultural domestic accountability system. This system contributed to the substitution of collective agricultural holdings with individually administrated holdings. Later, there was the introduction of less taxation in the agricultural sector, an initiative that was followed by most developed countries in their early years of development (Snape 1991, p. 67). Developments in the agricultural sector grew faster in a similar manner as the other sector of the economy such as industries from 1979 to 1984. However, the benefits of moving to the household responsibility system and the increment of relative prices for farm products were realized later, in the mid 1980s. After the 1980s, agriculture did not experience any significant growth like the service and industrial sectors. The industrial sector experienced faster growth on the eastern seaboard. In addition, trade in the rural townships boomed, which led to rising employment rates. In as much as there was the decline in agriculture’s contribution in the country’s GDP, and employment in the 1980s, there was a subsequent increase in the contribution to GDP in 1990s (World Bank 2005, p. 34). Introduction China is currently a signatory to WTO according to Pigott (2002). This enables the country to take an active part in new rounds of bilateral trade discussions. The country can, for example, demand improved market penetration for its agricultural exports and other products in the global market. If WTO membership improves China’s chances of increasing its access to agricultural products more than other markets in the global market in the future, that would be a significant benefit for China’ ...Download file to see next pagesRead More
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