The International Consortium on Agricultural Biotechnology Research (ICABR)



Biotechnology, Trade and Self Sufficiency in China


Fabrizio Felloni, John Gilbert, Thomas Wahl, Jim Zuiches, Washington State University





As the Chinese economy continues to grow and approaches higher stages of development, its policymakers face the task of choosing among competing agricultural policy options. There can be little doubt that agricultural and rural policy developments in China will leave a substantial impression on the rest of the world. Hence, there has been considerable interest in using quantitative modeling techniques, in particular applied or computable general equilibrium (CGE), to provide insights into the potential impact of potential developments in China. This paper makes a further contribution in this area, focusing on the issue of self-sufficiency and the role of biotechnology. We simulate the impact of alternative agricultural development scenarios on the Chinese and world economies, considering the possible effect of China's accession to the WTO and reversion to a policy of food self-sufficiency. In the context of the latter issue, we consider the potential of improvements in agricultural production technology brought about by biotechnology to assist the Chinese effort to remain self-sufficient.

This issue is of considerable importance. China's stated desire is to maintain a food self-sufficiency ratio of 90-95 percent. This is viewed as an important security issue, and current thinking among Chinese policy-makers, concerned about the consequences of reliance on international markets, is overwhelmingly in favor of the policy. However, the policy also raises conflicts in regard to China's other policy objectives. Maintaining high levels of self-sufficiency may not be possible without sacrificing industrial development. Moreover, a Japanese-style self-sufficiency policy will lead to Japanese-style food prices and is likely to, at best, slow rather than halt the decline in food self-sufficiency. These economic realities, coupled with China's strong desire to become a member of the World Trade Organization (WTO), may help to persuade China to move gradually towards a greater acceptance of the role of international markets in agriculture. Under the new agreements it is difficult to introduce or raise agricultural protection once tariffs are bound. In addition to the commitment to reform that China needs to show, China will be unable to choose the WTO agreements that it wishes to sign; all WTO agreements, including the one on agriculture, have to be accepted. If this is the case then productivity improvements are the only means by which self-sufficiency could be maintained. Hence we have a number of important questions addressed in this paper:


  • What changes in Chinese self-sufficiency levels are projected over the next decade?
  • How will WTO accession affect these levels?
  • What are the welfare costs (for China and globally) of achieving self-sufficiency through tariff/domestic policy?
  • What sort of technical progress is required to maintain self-sufficiency levels? Given what we know about the potential of biotechnology in various agricultural products, are these feasible?
  • What policy conflicts arise?


We use a recursive dynamic CGE model to examine these issues. Our model formulation allows labor to units move between different labor categories in response to changes in relative rewards, allowing us to also consider the impact on rural-urban incomes. Conflicts in China's policy objectives of industrialization, increasing rural incomes, maintaining self-sufficiency, and integrating with the world economy, are discussed in the light of the model results.



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