China's Import Demand for Agricultural Products: The Impact of the Phase One Trade Agreement

66 Pages Posted: 22 Jun 2020 Last revised: 28 Apr 2023

See all articles by Robert C. Feenstra

Robert C. Feenstra

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

Chang Hong

U.S. Department of Agriculture (USDA)

Date Written: June 2020

Abstract

In December 2019, the United States and China reached a Phase One trade agreement, under which China committed to purchase more imports from the United States: $12.5 billion more agricultural imports in 2020 and $19.5 billion more in 2021, as compared to 2017. We show that the most efficient way for China to increase its imports from the United States is to mimic the effect of an import subsidy. If China’s agricultural imports did not otherwise grow from their 2017 values, then the subsidies would need to be 42% and 59% to meet the 2020 and 2021 targets, respectively. These effective subsidies mean that China would divert agricultural imports away from other countries. We find that this trade diversion is especially strong for Australia and Canada, followed by Brazil, Indonesia, Malaysia, Thailand, and Vietnam.

Suggested Citation

Feenstra, Robert C. and Hong, Chang, China's Import Demand for Agricultural Products: The Impact of the Phase One Trade Agreement (June 2020). NBER Working Paper No. w27383, Available at SSRN: https://ssrn.com/abstract=3632609

Robert C. Feenstra (Contact Author)

University of California, Davis - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Chang Hong

U.S. Department of Agriculture (USDA) ( email )

1301 New York Ave. NW
Washington, DC 20250
United States

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