Corn trade simulations of China: reduction in tariffs versus expansion in tariff-rate quotas

Purpose Corn, which has the highest domestic production, planting area and consumption, is the top cereal in relation to demand and supply in China. However, the comparative advantage of China in corn has continuously deteriorated in recent years and based on the recent situation and possible supply and demand trends, it is widely accepted that a corn self-sufficiency rate of 95% is difficult to achieve. Under current import-restriction policies, corn may stand at the crossroads of reforms to solve its predicted insufficient supply. In this study, the authors analyse the necessity of relaxing trade restrictions on corn in China and explore the effects of trade restrictions by reducing tariffs and expanding tariff-rate quotas on corn and related industries and the welfare change caused by possible relaxations. Design/methodology/approach The authors construct a computable general equilibrium (CGE) model and design nine scenarios for the analysis. Findings The results show that relaxations of import restrictions are probable methods to meet the aim of sufficient corn supply during shortages. They are simulated to reduce corn's domestic production and price, increase import and import prices and lead to a decline in self-sufficiency but benefit the production of corn-related industries of corn. The results also imply that expanding the quota is a better method for releasing trade restrictions in China. Originality/value The comparative advantage of China in corn deteriorated with an increase in prices. Based on the current situation and possible trends of supply and demand, the referenced goal of achieving 95% corn self-sufficiency appears difficult, implying that reliance on imports is probably imminent and vital. This study provides simulation results in future scenarios and offers policy implications for China's corn trade policies.

Automated summary

The study suggests that relaxing import restrictions is a likely method to achieve sufficient corn supply, even though it may decrease domestic production and prices, increase imports and import prices, lead to a decrease in self-sufficiency, but benefit corn-related industries. The study also implies that expanding tariff-rate quotas is a better way to release trade restrictions in China.