An analysis on China's agricultural bilateral trade costs? 1995‐2007

Abstract

PurposeThe trade cost is a significant factor which restricts the trade potential between two nations. This paper aims to make a measurement of agricultural bilateral trade costs of China.Design/methodology/approachBased on Novy model, this paper makes a measurement of agricultural bilateral trade costs before and after China joining the WTO (1995‐2007).FindingsThis paper finds that China's agricultural trade costs with its five major trade partners have not got a pronounced downward trend during 1995‐2007. In ascending order, these are: Malaysia, the USA, Japan, Brazil and Argentina in 2007. Otherwise, there is an obvious corresponding relationship between the trade potential and costs of agricultural products, which is that high costs lead to inadequate trade. With a simple regression, distance and free trade agreement are found to be main factors influencing agricultural trade costs.Originality/valueBased on the revised gravity model, this paper especially calculates the agricultural bilateral trade costs before and after China joining the WTO, which expands the understanding of trade costs in an industrial perspective. It can prove the agricultural market opening extent, and also help us to learn more about how China participates in the division of the world farm produce market.