Food self-sufficiency, comparative advantage, and agricultural trade: a policy analysis matrix for Chinese agriculture

Abstract

This paper assesses the comparative advantage and protection of China's major agricultural crops using a modified Policy Analysis Matrix (PAM) and 1996 data. Commodities covered are: rice, wheat, maize, soyabeans, rapeseed, cotton, tobacco, sugarcane, and a subset of fruits and vegetables. Consistent with the intuition of the simple Heckscher-Ohlin model, the results strongly suggest that China has a comparative advantage in labour-intensive crops, and a disadvantage in land-intensive crops. Specifically, grain (wheat, maize, and sorghum) and oilseed crops (soyabeans and rapeseed) are less socially profitable than fruits and vegetables, tobacco, sugarcane, rice and cotton. Agricultural protection is reminiscent of the import- substitution era and reveals systematic patterns of input subsidy and output taxation through exchange rate overvaluation. Effective protection patterns show the high protection enjoyed by the rapeseed sector, and the effective taxation burdening tobacco and apples. The estimates of protection suggest that input policies unnecessarily induce deadweight loss to achieve self-sufficiency.