Three Essays on China's Agricultural Trade

Abstract

This dissertation consists of three chapters. In the context of the appreciation pressure that is faced by the Chinese currency (Renminbi, RMB) in recent years, using an Equilibrium Displacement Model, Chapter 1 studies the incidence of an appreciation of RMB on Chinese and U.S. tilapia markets. Results indicate that only 23%-26% of the exchange rate changes are absorbed by Chinese tilapia producers. Still, they bear a larger portion of welfare loss, and China’s deadweight loss increases with the increase in the U.S. import demand elasticity. This chapter also emphasizes the importance of considering the relationship between the exchange rates of the U.S. and the rest of the world, which, if ignored, would lead to an overestimation of the exchange rate pass-through. The export tax rebate policy, which enables the export enterprises to get a part or total refund of their value-added tax (VAT), was implemented in 1985. Due to the heated debate over whether or not the export tax rebate should be cancelled, Chapter 2 examines the effects of this policy on the welfare changes of Chinese consumers, producers, and foreign consumers in the fishery market. It takes into account the linkage between the retail-level market and the farm-level market. Simulation results indicate that although the export tax rebate improves the Chinese producer surplus, it works more like a subsidy on the foreign consumers due to the large export supply elasticity of China. China signed the Framework Agreement between China and the countries of the Association of Southeast Asian Nations (ASEAN) in 2002, according to which the China-ASEAN Free Trade Area was established in 2004. Then, the Chinese consumers could purchase the imported tropical fruits with a lower cost. This is regarded as bringing about an increase in the competition between Chinese domestically produced tropical fruits and the tropical fruits imported from the ASEAN countries. Chapter 3 estimates the expenditure, own-price and cross-price elasticities of both domestic and imported fruits, using a Restricted Source-Differentiated AIDS (RSDAIDS) model. Results indicate that Chinese produced bananas and pineapples have strong potential in the Chinese market, and they do not compete directly with the products imported from the ASEAN countries. Moreover, a decrease in the import prices can improve the revenues of the exporting countries, thus the China-ASEAN FTA can lead to a win-win situation in Chinese tropical fruit market between China and the ASEAN countries.