Abstract

In this paper we provide an analysis of China's cotton policy and develop a framework to quantify the impact of both China's World Trade Organization (WTO) accession and Bt (Bacillus thuringiensis) cotton adoption on Chinese and U.S. cotton sectors. We use a Chinese cotton sector model consisting of supply, demand, price linkages, and textiles output equations. A two-stage framework model provides gross cropping area and total area for cotton and major subsitute crops from nine cotton-producing regions in China. Cotton demand, total fiber demand, and cotton share are estimated for each end user. The estimated parameters from the Chinese model are then used with the Food and Agricultural Policy Research Institute (FAPRI) modeling system to simulate various scenarios of China's WTO accession and Bt cotton adoption. The results suggest China's accession to the WTO would increase Chinese cotton imports on average by 455 to 676 thousand metric tons (tmt) during the 2002-2011 projection period. With the adoption of Bt cotton-the WTO accession factor notwithstanding-China would increase its cotton imports by 427 to 648 tmt. In these scenarios, U.S. cotton exports increased by 76 to 109 tmt and 71 to 104 tmt, respectively.

Keywords: agricultural trade, Bt technology, China and cotton policy, U.S. cotton exports, World Trade Organization, WTO accession.