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1 No. C * No. C * 1

2 * No. C * 2

3 China s cotton trade policy at the crossing road Summary The paper assesses the recent surge of China s cotton imports and evaluates the policies regulating cotton imports such as quota and sliding duties. In light of the evidences regarding China s domestic cotton production and labor productivity, cotton farmers income, growth of cotton textiles and its job creation effects, the paper argues that the growth of cotton imports is indeed a healthy development. The policies of quota and sliding duties are nevertheless inefficient and/or at odds with basic principles of market mechanism. The paper proposes to further liberalize China s cotton trade policies unilaterally and/or in the multilateral context of the Doha Round negotiations. Key words: China s cotton trade, cotton quota, sliding duties 3

4 A1981/1 2006/6 2-B1981/1 2006/ A B

5 Contents of Chapters 1Recent surge of China s cotton imports and the policy debate 2Assessing cotton imports from China s domestic production sector 2-1Cotton output growth and evolving regional pattern 2-2Changes for cotton labor productivity and cotton farming incomes 3Assessing cotton imports from China s textile and clothing sectors 3-1Recent growth of China s textile output and exports 3-2Measurements of job creation by China s textile sector 4Economic analysis of China s cotton quota regulation policy 5Economic analysis of China s cotton sliding duties policy 6Necessity of cotton price integration and policy suggestions 7China s cotton trade policy at the crossing road: Concluding remarks Appendix 1Estimates of employments working in the cotton textiles sectors for the firms above the scale in China ( ) Reference Figures and Tables Fig.1China s cotton trade ( ) Fig. 2-AThe Chinese and foreign cotton prices (Jan Jun Fig. 2-BGap between the Chinese and foreign cotton prices (Jan Jun. 2006) Fig. 3Cotton total output and output per area in China ( ) Fig. 4Cotton labor productivity in China ( ) Fig. 5Incomes from cotton farming and cotton imports in China ( ) Fig. 6-AOutputs of yarn and chemical fiber in China ( ) Fig. 6-BOutputs of cloth and apparels in China ( ) Fig. 7Imports and exports of cotton textile products in China ( ) Fig. 8Employments for the textile firms above the scale in China ( ) Fig. 9Employments for the whole textile industry in China ( ) Fig. 10Analytical framework for assessing the import quota Fig.11Schematic presentation of China s open cotton industry Fig. 1 in Appendix 1Statistical coverage of China s textile industry Table 1Regional pattern of China s cotton production ( ) Table 2Employments in textile sector by China s economic Census

6 % / 36% average ginning yield ginning cost 400 yuan per tonne / 77 / / a lint price of Grade / 81 /seed cotton prices / / 85.5 /Cotton Outlook, Vol. 84, No. 36, September 8, 2006, p

7 2-A / /Cotton Outlook, Vol. 84, No. 36, September 8, 2006, p

8 sliding duties 40% WTO MFA / % %

9 % % 30.4% / /

10 / / % / / 82.4% 9% % 5 5 Gene modified organisms: GMOs 90 5% % % 25%

11 %

12 / % %

13 HS % % HS % %

14

15 %-7% % % %

16 % % 16% % 34% % % % %

17 10 S D P W cif OQ D OQ s D 1 D 0 P w S 1 S 0 P w t Q S Q D Q S Q D A A+B+C+D A D B C deadweight lose 10 D 1 S P* P W t A S 0 B D C D 0 D S 1 O Q S Q S Q D Q D Q S Q D D D / P W Q S Q D P * D

18 Johnson, 1973 WTO WTO 90 18

19

20 11 90 WTO 20

21 /

22 /

23 / / % 77% 47-48% 48% / / /

24 / * / / / *0.5 * / /

25 CCER Johnson, D. Gale (1973): World Agriculture in Disarray, The Macmillan Press Ltd. 25