Do state‐owned enterprises benefit more from China's cereal grain tariff‐rate quota regime?

Abstract

AbstractIn 2016, the United States launched a formal dispute with the World Trade Organization (WTO) concerning China's wheat, corn, and rice tariff‐rate quota (TRQs) administration. A formal panel was requested in August 2017, with several major grain exporters, including Canada, joining as third‐party members. This study employs two unique micro‐level datasets to investigate the role of state‐owned and non‐state‐owned enterprises’ (SOE and non‐SOE, respectively) in China's agricultural imports. Results suggest that SOEs are noticeably more active in importing quota‐bound commodities compared to quota‐free imported commodities. Moreover, the larger role of SOEs in China's cereal grain imports is negatively correlated with China's food security targets, as measured by estimated prior year stocks‐to‐use ratios. Conversely, above average food security targets in China's cereal grain market leads to an important extensive margin adjustment of non‐SOE import participation. Finally, we find very little compelling evidence that China's September reallocation of unused TRQ has any economic or statistically significant impact on non‐SOE entry into importing or the intensity with which their imports occur.