Economic growth and agric. development: What roles for food price and trade policies?

Kym Anderson

University of Adelaide, Australian National Universityand Chair, IFPRI Board of Trustees

kym.anderson@adelaide.edu.au

IFPRI Roundtable on Agriculture, Food and Nutrition Security,Peking University, Beijing, 13 May 2015

The past three decades: China maintained food self-sufficiency despite rapid industrialization

Growth in farm output kept pace with growth in domestic demand, due to:

Household Responsibility System allowing productivity catch-up

Increased public investment in agric R&D, rural infrastructure, & rural human capital

China’s agric productivity growth (%/year) Source: Fuglie et al. (2012)

The past three decades: China maintained food self-sufficiency despite rapid industrialization

Growth in farm output kept pace with growth in domestic demand, due to:

HRS allowing productivity catch-upIncreased public investment in agric R&D, rural infrastructure, & rural human capitalGradual reductions in direct and indirect disincentives to farmers

Nominal rate of govt. assistance to agric and manufacturing in ChinaSource: Updated from Jikun Huang et al. (2009)

Nominal rate of assistance to agric in China and high-income countriesSource: OECD (2013)

What are China’s policy options for maintaining national food security …

… while also reducing the rural-urban income gap, poverty, and soil and water degradation?

What are China’s policy options for maintaining national food security …

One option: limit competition from imports of rice, wheat, meat & milk

Helps those farmers, but hurts consumers of those goods and adds further soil & water degradation

Modeling the world economy in 2007 and 2030: China’s food self sufficiency Source: Anderson and Strutt (Food Policy, Dec. 2014)

China’s self-

sufficiency in 2007

(%)

Self-suff. in 2030 (%), asssuming no policy changes

Import tariff (%) to ensure

self-suff. in rice wheat, meat &

milk, 2030

Rice 101 95 196Wheat 103 97 114Beef & sheepmeat 94 89 255Pork & poultry 101 37 164Dairy products 97 75 159Maize 105 98Oilseeds (soy, palm …) 56 35

Alternative policy options for ChinaBoost agric productivity through more investments in agric R&D, rural infrastructure, and rural human capitalCreate/improve markets for labor, capital, land, waterReplace farm price-support policies with generic conditional cash transfers to poor (& to reduce rural-urban income gap)

Share of adult population with bank account or equivalent, 2014 (%)Source: World Bank (2015), The Global Findex Database 2014

Advantages for China of avoiding agric protection growth pathway

Consumers will get cheaper food and a more-varied dietLess stress on soil & water resourcesAvoids disputes with WTO membersOpens possibility for China to use G20 Presidency in 2016 to lead completion of Doha Round & reform of WTO

benefits from which would be largest for China

Thanks!

Huang, J., S. Rozelle, W. Martin & Y. Liu (2009), “China”, Ch. 3 in Distortions to Agricultural Incentives in Asia (eds. K. Anderson & W. Martin), Washington DC: World Bank

Anderson, K. & A. Strutt (2014a), “Food Security Policy Options for China: Lessons from Other Countries”, Food Policy 49: 50-58, December

Anderson, K. & A. Strutt (2014b), “Emerging Economies, Productivity Growth, and Trade with Resource-Rich Economies by 2030”, Australian Journal of Agricultural and Resource Economics 58: 590-606, October

World Bank’s Distortions to Agricultural Incentives database, from which the NRAs are freely available at www.worldbank.org/ agdistortions