Research On The Tariff-cut Impacts On China's Agriculture After Establishing The Sino-Australia Free Trade Area

Sino-Australia Free Trade Agreement negotiation which was initiated on May 23, 2005 and conducted a total of 11 times is the China's most important bilateral trade cooperation negotiation. In the current negotiating process both sides worry about the agricultural trade, making it a sensitive area and focus of the negotiations. The Chinese government feels concern about the impacts from Australia's agricultural products after the liberalization of trade, and Australia cares about China's internal barriers.Against this background, the paper first analyses the status and characteristics of the Sino-Australia trade in agricultural products with some trade-related index based on the Sino-Australia agricultural products trade data from 1997 to 2006. The results show that: Compared with China, Australia's international competitiveness of agricultural products has a significant advantage; Sino-Australia trade in agricultural products is characterized by a high level of inter-industry trade; The export structure of Australia's agricultural products and the import structure of China's match very well. The bilateral trade of agricultural products are highly complementary, and have a great potential for development; On the one hand, the Sino-Australia trade in agricultural products has a reasonable structure. Both sides export their most advantageous agricultural products to each other. On the other hand, there exists asymmetrical pressure in the Sino-Australia trade in agricultural products. China is facing significant pressure of the trade deficit.After the introduction and expansion of China's dynamic computable general equilibrium model - MCHUGE Model, including the database split, resetting import and export model equations, as well as the expansion of FAN decomposition , the paper simulates the tariff-cut impacts on China's agriculture after establishing Sino-Australia Free Trade Area. The simulation results show that: the bilateral tariff reduction will enable China's GDP in 2010 to grow 0.24 percent, and by the year 2015 there is still a growth of 0.13 percent . However, China's agriculture will suffer to a certain extent. Most of the agricultural industries' output will decrease due to the import substitution effect of agricultural products from Australia; The price level of domestic agricultural products will decline, and it is not conducive to the income of farmers; Most of the agricultural indutries' demand for labor will decline too, causing a certain amount of surplus of rural labor forces; China's deficit in trade of agricultural products with Australia will be further expanded due to the asymmetrical increase in import and export. Finally, the paper makes corresponding policy recommendations according to the simulation results.