The Choice Of China’s Grain Domestic Suppot Under The International Rules

China has gradually formed a domestic support system of grain products since join in WTO.However,the domestic support system is suffering domestic and international pressure with the acceleration of opening up.The domestic support policies which aiming at production increasing are facing the embarrassing situation of the increases of production,importation and inventory.Especially in the situation of the rising grain production cost and the lack of international competitiveness.At the same time,the agricultural domestic support policies of China are increasingly subject to the constraints and influences of international trade rules.The United States sued the World Trade Organization(WTO)in 2016,claiming that China’s grain domestic support level in 2012-2015 has exceeded the upper limit of the WTO commitments.At the same time,the domestic support indicator of agriculture released every year by the Organization for Economic and Co-operation and Development(OECD),is an important reference for WTO trade negotiations,and has an extensive international influence.Which also shows that the level of support for China’s grain producers is at a historically high level.The"ceiling" of trade rules has begun to constitute a substantial constraint on China’s grain domestic support.In this context,the domestic grain support policy needs to be adjusted urgently to meet the dual challenges at home and abroad.Then,how to adjust the domestic support policy to comply with the international trade rules and the internationally recognized agricultural policy evaluation system,and alleviate the pressure of the increasing of production,importation and inventory in the domestic grain industry,has become a significant problem that needs to be solved urgently.Faced with the dual challenges inside and overside the country,the China’s grain domestic support needs to be adjusted urgently.How to adjust the domestic support policy has become a major problem that needs to be solved urgently.In this respect,the research goal of this paper is to identify the optimal policy that is in line with international trade rules and internationally recognized agricultural policy evaluation system,which can also alleviate the real pressure of "three increases of production,importation and inventory." in the domestic grain industry.According to international practice,the "domestic support" policy is mainly divided into three categories,namely market price support,income support and agricultural general service support.Which of the three policy options will be the best way to use in the future according to the international rules?As one of the choices,market price support has a significant effect on ensuring domestic grain production,but at the same time it has a strong trade distortion effect.Therefore,the "amber box" policy that is subject to WTO restrictions is subject to multilateral trade rules.It will also lead OECD Producer Support Estimates increase,which will bring greater pressure on WTO and OECD agricultural policy assessment.As the second choice,income support are design to increase farmers’ income,but way of support,such as target price subsidy,has strong trade distortion effect,which will increase the pressure of WTO and OECD agricultural policy indicators;Direct payments,which trade distortion effect is relatively small,but increase the pressure on the OECD agricultural policy indicators.As the third choice,general service belongs to the agricultural investment which is recommended by both the WTO and the OECD.However,this policy does not aimed at specific products,and usually cannot increase the output and farmers’ income significantly in the short term.It is often considered as "outcome is not significant" and "investment efficiency is not high."To this end,this paper will evaluate and compare the effects of three kinds of"domestic support" policies such as market price support,income support and general service support,to alleviate the pressures inside and overside the country.By building China’s main grain partial equilibrium model,policy evaluation model,and transcendental logarithmic production function model,empirically quantify the impact of the above three policies on the evaluation of the two domestic mainstream agricultural "domestic support"indicators of WTO and OECD.In order to identify the optimal policy choices for China’s domestic support in line with international rules.The preliminary conclusions drawn from this study are as follows:Content 1:China’s grain market price support are facing a lot of pressure by WTO and OECD indicators.Government intervention price purchase policy will increase the level of WTO and OECD market price support indicators.Especially when production costs are rising,the rise of production costs and intervention prices will exacerbate the pressure,which come from the two domestic agricultural "domestic support" index evaluation.A country’s agricultural support protection policy consists of a combination of border policy and domestic support policy.The two can replace each other to a certain extent,so one of the ways to raise the level of tariffs or alleviate the pressure of "market price support"policy.However,this study found that increasing tariffs can only alleviate the pressure of WTO index evaluation,but can not alleviate the pressure of OECD index evaluation.Partial equilibrium model shows,China’s tariff is much lower than Japan and South Korea,even with the use of the highest tariff(65%),it is still not enough to protect the grain industry from import shocks.Considering the overlapping domestic support measures,the level of WTO and OECD "domestic support" indicator will be improved further,and brings greater international pressure of the usage of China’s market price support.Adjusting the reference price,according to the inflation rate,is another way to alleviate the pressure on the evaluation of WTO indicators.The measure shows that after deflation,the "domestic support" of the three main staple foods in China from 2011 to 2015 does not exceed the micro-permissible upper limit of 8.5%.However,the World Trade Organization still has some ambiguity about the selection rules of the reference price.Whether the dispute between China and the US staple food can adjust the reference price is still facing uncertainty.Content 2:China’s grain income support,which is one of the policy choices,will still facing th pressure by WTO and OECD indicators.Target prices and direct payments are two typical income support policies.China’s target price adopts the "production cost plus reasonable profit" method to set the target price.However,both theoretical analysis and US data show that,in the rising stage of production cost,setting the target price according to the production cost will cause the subsidy to expand into expansion.Then increase the pressure on WTO and OECD indicators.As for direct payments,which is not included in the WTO AMS,but will be included in the OECD PSE.To achieve the same incentive effect,the higher the production cost,the more the direct subsidy will be increased,which will increase the OECD PSE calculation pressure.For China’s main grains,the Policy Evaluation Model shows that increasing the use of income support policies can’t alleviate the pressure of domestic support indicators evaluation.The increase in income support based on land payment will lead to an increase in land factor prices.The measure shows that the unit corn income support increases by 1%,and the unit product production cost will increase by 0.6%.With the rising production costs,the "domestic support" input demand will be greater,which increase the pressure of indicator evaluation.Under the conditions of low border protection level and insufficient competitiveness,the WTO and OECD income support indicators evaluation may still face certain upward pressure,even if reducing the market price support and increasing the income support at the same time.Content 3:General services,which is one of the policy choices,will decreasing the pressure by WTO and OECD indicators through reducing production costs.General Service is not focus on specific products and specific producers,and does not increase the pressure of evaluation of WTO and OECD indicators,but it is often considered that general support effect is not direct.The comparison shows that the level of general services in countries with high production costs is generally lower than that of countries with competitive advantages,and even shows a downward trend(such as Indonesia,Vietnam,China,etc.).However,the empirical results show that certain kind of gerenal services can reduce the production cost of China’s grain products.Through direct substitution of private input and optimization of input factor structure,general service can alleviate the pressure of international domestic Support.Taking agricultural infrastructure as an example,the agricultural infrastructure increased by 1%and the production cost of staple decreased by 0.4%.Among them,the WTO new "green box",which focuses on improving soil and water conditions,can save more labor input.The traditional "green box" policies(electricity,roads)can save more capital input and material input.The WTO new "green box" policies,such as farmland infrastructure can significantly reduce the production costs of the three staple;the new"green box" that improves the water conditions has a more pronounced effect on corn.Therefore,in combination with changes in WTO rules,according to the geographical characteristics of different major grain producing areas and cost structure characteristics,increasing public investment in general service effectively,can alleviate the pressure of assessment of domestic support indicators of staple food.Therefore,this paper proposes the following policy recommendations:First,optimize the level and structure of China’s grain domestic support gradually.According to the law of the market,reduce the market price support moderately;according to international trade rules and domestic policy needs,demonstrate and use farmers’ income security policies more cautiously;to increase the international competitiveness increasing general services on agriclture.Second,increase investment in agricultural general services selectively.Based on the changes of international rules,the differences in planting cost structure and geographical differences in major production areas,different general services should be formulated for different major grain producing areas.Third,advocate the construction of a more equitable and rational international trading system environment.Based on the differences between developing countries and developed countries in global trade negotiations,we should call for a policy evaluation system including "non-domestic support" factors such as tariff levels and inflation,and seeks improvement through international negotiations.