Abstract
The impact of trade liberalization on Taiwan’s agricultural sector has been an important issue in policy debates. In this study, a case study of cross-strait trade liberalization is conducted. With the elimination of all tariffs on bilateral trade between Chinese Mainland and Chinese Taipei, the SAM-based computable general equilibrium (CGE) model and database are applied to simulate the impacts of cross-strait trade liberalization on Taiwan’s economy, agricultural output, non-agricultural income, farm household income and employment. Simulation results demonstrate that Taiwan’s GDP will increase by 1.78%, but total agricultural output will decrease by 0.9%. For per farm household income, although agricultural income decreases by NTD 1648, non-agricultural income will increase by NTD 10,580. In total, per farm household income increases by NTD 8,932 with cross-strait trade liberalization. With trade liberalization as the engine of growth and a trade adjustment assistance mechanism at work, economic growth in Taiwan’s agriculture may be maintained and in the long run, non-agricultural income and employment are likely to increase to provide a “safety net” for farm households.
Highlights
In the process of economic development, the pace of agricultural development is relatively slower than other industries
For per farm household income, agricultural income decreases by NTD 1648, non-agricultural income will increase by NTD 10,580
Damena and Habte (2017) studied indicates that nonfarm income has a role which is significant in maintaining household livelihood and to change their living standard such as enabling farmers to spend more on their basic needs
Summary
In the process of economic development, the pace of agricultural development is relatively slower than other industries. Changes in the income of farm households is a result of the comparative advantages and disadvantages in trade directly affect the value of the agricultural products, potentially leading to swaps of domestic industry. Reardon et al (2001) observed Latin American countries and suggested that the agricultural sector’s policies must be focused on increasing non-agricultural income in the context of regional trade liberalization They proposed that in rural areas, we should develop agricultural economy. Development of non-agricultural economy in rural areas and enhancing the non-agricultural part of the income of farm households could stimulate agricultural productivity indirectly. Ruttan (1955) believed that to increase the income of farm households, it is important to increase job opportunities in the non-agricultural sector and activate the local economy. The main instruments to promote rural development include investment in education, transportation, health, housing, and other construction in order to increase the attractiveness of rural areas (OECD, 2016). Damena and Habte (2017) studied indicates that nonfarm income has a role which is significant in maintaining household livelihood and to change their living standard such as enabling farmers to spend more on their basic needs
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