Sino–US Agricultural Trade Potential: A Gravity Model Approach

Abstract

Agricultural trade is an important component of the economic and trading relations between China and the USA. Given the world financial crisis, the economic downturn and the potential rise of trade protectionism, it is important to analyse and estimate the mutual benefits and potential of Sino–US agricultural trade before and after China's accession to the World Trade Organization (WTO) in an attempt to re-examine and reconsider the benefits of trade liberalization. Adopting the gravity model approach with a fixed-effect hypothesis and using SPSS software 17.0, the author undertakes an empirical analysis of the agri-trade potential between China and the USA and between the two countries and their major trade partners. The results indicate that (a) China's WTO accession has brought about opportunities for agricultural trade for both countries, but the USA has gained more benefits from the bilateral trade than China; (b) the major factors influencing Chinese and US agri-exports are different, reflecting the features of the economic growth and industrial structures of the two countries; and (c) China and the USA have different potentials for agri-exports with different regional characteristics. Based on these findings, policy recommendations are proposed for both China and the USA to strengthen their agri-trade ties.