Impact of Increasing Agricultural Domestic Support on Food Price Transmission

Fan Yang, Kirsten Boysen-Urban, Martina Brockmeier, Eddy Bekkers and Joseph Francois

No 332806, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Purpose – The paper aims to explore how increased agricultural domestic support might affect China’s domestic market under the assumption of incomplete price transmission caused by border measure adjustments. Design/Methodology/approach - We extend the standard Global Trade Analysis Project (GTAP) framework in two respects. First, we incorporate price transmission elasticities so that the extended model accounts for border measures to stabilise domestic prices. Second, we update the current representation of agricultural domestic support in China to analyse the impact of long-term food security policies. Running a set of simulations, we examine how different policy assumptions affect the agricultural market. Findings – Adjustments of border measures as responses to high international agricultural prices mitigate the domestic prices increase, which also lead to an increase in China’s trade deficit and prohibits net food sellers from receiving high prices. In the long term, an increase in China’s agricultural domestic support to its WTO de minimis commitment level would increase domestic agricultural production and reduce its demand pressure on the international market.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332806

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