China's agricultural trade costs: Measurement and determinants

Trade costs involve important implications that partly determine a country's ability to integrate itself into a global trading system. The major purposes of this study are to analyze China's agricultural trade costs and the determinants of these costs. A micro-founded measure of trade frictions developed by Novy (2011) is applied to estimate an indirect measure of China's agricultural trade costs with a large cross-section dataset of its trading partners. The results show that China's agricultural trade costs experienced only a modest downward trend from 1995 to 2011. The weighted average tariff equivalent of trade costs is 141 percent in 2011, which is far higher than the world average. Statistical analyses of the determinants of China's agricultural trade costs suggest that geographical and cultural factors explain most of the trade costs variation, whereas participation in multilateral and bilateral trade agreements do not appear to be an important determinant. In addition, the trade cost measure shows substantial differences in the levels of integration across sectors and trading partners.