Current Situation and Optimization Countermeasures of Cotton Subsidy in China Based on WTO Rules

Abstract

Cotton plays an important role in China’s agricultural production structure and international trade; therefore, China has implemented a variety of cotton subsidy policies. Since China joined the WTO in 2001, WTO rules have become substantive constraints on its agricultural subsidy policy. Therefore, in order to prevent appeal cases of China’s cotton subsidy, in this article, we investigate the current situation and optimization countermeasures with respect to China’s cotton subsidies based on WTO rules. According to calculation of the level of China’s cotton subsidy support under WTO rules, it currently exceeds 8.5% of the cotton production value. Secondly, we estimate the change in cotton subsidy effect when the support level of China’s cotton subsidy policy is directly reduced to 8.5%; the results show that such a reduction would have a considerable impact on the production scale. However, due to the constraints of the political and economic goals of cotton subsidies, the Chinese government can only “box shift” subsidies by changing the subsidy method and object in order to comply with WTO rules. Finally, from the perspective of how to use cotton subsidies to improve the efficiency of production factors, the Chinese government should focus on optimizing the cotton subsidy policy according to three aspects: improving the Amber Box subsidies, expanding the Green Box subsidies and increasing the Blue Box subsidies so as to maintain the existing level of cotton subsidy support.