Research On The Estimation And Rectification Of Externalities In China Cotton Production

Cotton is the strategic material related to national interest and people’s livelihood. It is also the vital raw material to guarantee the sustainable development of textile industry in China. Cotton production is very closely connected with the national distribution of agriculture and food security, economic development in cotton reign, the employment and farmers’ income increase. Cotton industry has a long industrial chain which is related to large employed population, with immense influence scale, cotton industry is extremely important to the balanced development of national economy. But it faces huge threat and sever challenge because the developed countries have given such high subsides to their cotton production that the developing cotton-producing countries including china have lost the pricing power in international cotton markets. Additionally, for the impact of financial crisis in2008and economic long wave, the cotton industry fluctuates greatly and the income for cotton farmers drops sharply. The minority cotton farmers in developed countries who enjoy high subsides threat the cotton-farmers’ income in a lot of poor developing countries.From the perspective of present subsidy policies and domestic supports of developed countries, cotton trade is the typical case of international trade inequality. The USA and other developed economic entity have given high subsidies to their cotton production and export for long time, on the other hand, also strictly limit the import of Chinese textile-clothing production which has competitive advantage for China. All of this has consequenced international trade inequality.This study on cotton production externality and its adjustment are based on the consideration of cotton production security, taking Xinjiang for example, using cotton production externality which is measured from two aspects:positive externality and negative externality so, we can make the cotton subsidy standard and method and also figure out the reasen, scale and targets of subsidies, which is very meaningful to scientifically formulate our cotton subsidy policy, to enhance our cotton industry competitiveness and to protect our cotton industry.By observing agricultural externality phenomena and using Pigovian Tax theory and Kos’s Equity theory, this paper analyzes and explains the impact of externality to cotton production and discusses the policy choice to solve the externality problems. It is suggested in this research that subsidy is a much more effective way to solve externality problem for cotton production. Taking the cotton region in Xinjiang for example, using Contingent Valuation Method, Decompose Summation Method, Parameters according to Law Method, Direct Marketing Method, Displacement Cost Method and so on, this paper measures the positive external effects of eco-environmental value, natural landscape value, social security etc., and the environmental negative effects from pollution, carbon emission, ecological loses etc., Negative effects are results of using chemical substances, fossil energy and water in cotton industry chain. Furthermore, according to the assay method and the result of Xinjiang cotton production external value, this paper assesses the cost of negative externality and the value of positive externality for our national cotton production, together ensuring the cotton production comprehensive externality which is the basement to make the subsidy standard of cotton industry.This paper lists20items of external influencing factors for national cotton production First, by subentry calculation, for national cotton production in2012, the result is that the positive external value is352.36x10RMB and the negative external cost is76.1033×108RMB. Finally, by summarizing, the result is that the positive external value is larger than negative external cost for national cotton production and the comprehensive external value is276.2563×108RMB, about44.56×108dollar, that is to say unit area external value is5892.8RMB per hm2according to the cotton plantation area very year. Therein, there are10positive external influential items and10negative external influential items for itemization calculation.After investigating400residents’willingness-to-pay at Xinjiang in2012, it is indicated that the positive external value for cotton production from social security, agriculture and so on is66.3871×108RMB; Referring to the assessment method and result of external value of china cotton production and using Decompose Summation Method, the carbon sink function value for cotton production is56.7776×108RMB by Decompose Summation Method. The result from assessing cotton producing biodiversity loses, environmental pollution, water waste and so on indicate that the environmental negative external cost, for cotton production is36.9099×108RMB in2012, among which environmental value loses from irrigating water waste, as a major negative external cost for cotton production is24.4827×108RMB, on the other side, the positive external value is larger than negative external cost, And the comprehensive external value reaches the height of86.2548×108RMB for Xinjiang cotton production in2012. Basing on the measurement of positive and negative external effect and using Market Equilibrium theory and Externality theory, this paper discusses the necessity and rationality from such aspects as cotton production’s feebleness, polyfunctionality and externality feature and the cotton supply security situation on national level. According to the thinking of eliminating positive and negative externality in Externality theory and referring to the experience of foreign countries, this paper designs the cotton subsidy policy initiatives about the standard, object, and method of subsides during the process of cotton production and domestic intermediate. Referring to external value of cotton production and considering the government financial power, our national cotton subsidy standard should below the USA and above Brazil and Turkey,namely,0.2-0.4dollar per kg,20-40dollar per mu or300-600dollar per hm2. According to the subsidy standard, the annual cost for government is about174×108RMB, or28×108dollar per year, around63%of our positive cotton production externality value. By this standard, we designs12national cotton subsidy items, among which the major ones are the subsidies of planting and agri-environmental protection, life insurance for cotton farmers and minimum income and cotton produce investment, These three types of subsidy occupy73.5%of the total subsidies, with53.7×108RMB,39.8×108RMB、31.4×108RMB respectively. Mainly considering the huge social and eco-environment positive external value for cotton production, the subsidy object is cotton farmers who have8subsidy items.Finally, suggestions are that the government shoud:a) enhance the construction of cotton production infrastructures; b) supply public service; c) set up cotton subsidy policy; d) safeguard mechanism including cotton statistical information system and cotton subsidy policy; e) enact supervisory mechanism, cotton information feedback mechanism and so on to ensure that the subsidy policy is carried out smoothly and the cotton farmers really get the benefit.