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

Round 1

Reviewer 1 Report

I believe the article is now clearer and the changes respond to my questions.  There are a couple typographical issues, like Table 4 is now offset, and there is no reason not to round the digits to the nearest 100th place. I would suggest that the term “micro-permissible” on line 201 be replaced by the WTO legal terminology, “de minimis”.

Author Response

1.The author has dealt with the typesetting problems in Table 4.

2.Expert opinion expects the author to round the digitsto the nearest 100th place.

The author has revised Table 1 as required. And if some numbers in Table 2, Table 3, Table 4 and Table 5 are modified according to this requirement, 0.00 may appear in some table. So the author keeps the digits in the empirical part to four decimal places

3.The author has replaced the term “micro-permissible”to“de minimis”, and also revised the WTO-related terms involved in the article.

Finally, thank you very much for your comments on the revision of my article.

Author Response File: Author Response.pdf

Reviewer 2 Report

Ok for the revisions

Author Response

Thank you very much for your comments on the revision of my article. Please see the attachment for specific modifications.

Author Response File: Author Response.pdf

Reviewer 3 Report

I am happy to see an improved and revised version of the paper after addressing my and other reveiwer's comments. Most of my concerns stand addressed while starting introduction with 0 number seems odd. Similarly, figures 1 and 2 are ok but they can be placed next to each other to build a context. I am much perplexed at the Discussion section and Conclusion. The discussion is devoid of any literature related to the subject of the study to validate the implications or otherwise contest the earlier findings. Moreover, the conclusion needs a thorough revisit to include trade implications as well as possible limitations of the study and the future prospects for further research. An economist or a trade specialist would be much convesant with categories of the subsidies as to which are allowed or which are prohibited, however, a general reader may confuse on such nomenclature and its relevance to agriculture trade. It would be better to just shed some light on AoA and give little definition along with some example on different subsidies under domestic support clause of the agreement.

I again thank the authors and journal for giving the opportunity to read this paper.

Author Response

1. The author has started the article introduction with 1 number according to the suggestion of experts.
2. The author has seriously considered the suggestion of experts, and placed Figure 1 and Figure 2 side by side, which the author also thinks is very reasonable. But in the process of trying, the author found that there may be problems with clarity and typography, and it may be the author's problem. Therefore, the author hopes to further improve it in the subsequent typesetting.
3. Based on the suggestions of experts, the authors have improved the discussion and conclusions of the article. Please see the attachment for specific modifications. Thank you very much for the expert suggestions, and also help the author to provide ideas for revision.
4. Experts mentioned that general readers may be confused about the definition of the relevant statement, which is something that the author omits to consider. Therefore, in the process of revision, the author explained some important contents by adding footnotes.
Finally, thank you very much for your comments on the revision of my article again.

Author Response File: Author Response.pdf

Round 2

Reviewer 3 Report

The paper has improved very significantly and can be considered for publication.

This manuscript is a resubmission of an earlier submission. The following is a list of the peer review reports and author responses from that submission.

Round 1

Reviewer 1 Report

This paper reports that China’s cotton subsidy support exceeds 8.5 percent of cotton output and is in excess of allowable limits at the WTO.  The paper then argues that because actually reducing these subsidies would not be possible, China should reform the subsidies to satisfy the requirements of the “green box” and “blue box” categories at the WTO, namely switching from price support to income support. In support of these claims, the authors provide econometric evidence of the effects of China's subsidy programs, finding that two cotton subsidy programs have had positive effects on prices, have distorted the market, and have harmed the environment.

The article contains interesting insight into China’s cotton subsidy program.  However, it is not clear how the evidence speaks to the policy issue in question, and in some cases the evidence is unclear. Two policies are studied, a purchasing and storage policy in 2011-13 and a target price subsidy policy in 2014.  On page 6, the results show these subsidy programs positively affect the income of cotton farmers by affecting the planting area of cotton farmers, but also that both programs “have a significant negative impact on the planting area of cotton farmers”. This seems at odds with the idea that the subsidies encourage uneconomical production, as stated on page 9, that “cotton subsidies will increase the proportion of cotton planting… increase the production area and scale”. While I buy that these programs distort the use of productive resources, how all of these results fit together is unclear.  This is to say, the description of the evidence does not paint a clear picture of the benefits of an income support program over a price support program.

Perhaps more importantly, it is not clear that the paper answers the main question, which is whether China can achieve its policy aims with an income support program.  The analysis of the ecological and environmental effects of cotton subsidies, for instance, seems to be a different question unless it is made clear that this is an important political goal of the government. The claim is that the “current environment” makes it impossible to reduce subsidies, and that only shifting to less distortionary kinds of subsidies is possible, but it is not clear why that is.

The analysis proceeds with 12 provinces over 10 years, but the econometric evidence is not fully presented.  For example, the GMM analysis uses an instrument, but does not mention what it is.   This is important because the allocation of the subsidy is calculated (it appears) to be on the basis of cross-province variation in acreage so the main independent variable is essentially a measure of production.  Given that the program has some sort of goal in affecting cotton output, I would want to know why the allocation of subsidies across China is a plausible source of exogenous variation.  I was unable to find the cited work for the reference to the GMM approach, as they are in Chinese language journals.

Overall, it seems like a reasonable approach, but three things need to be made clearer. 1) What are the constraints on subsidy reform (political, economic, environmental)? 2) How do the two subsidy programs map onto the question of blue and green box subsidies.  3) What do we have to believe about the empirical approach to draw policy inferences from the GMM analysis.

Minor comments:

The article requires significant english editing.  See, for example, line 19-21, 32-34.  The tables have an excess of significant digits, and the Hansen test indicates a possibility of singularity (not surprising given the small sample size).

Reviewer 2 Report

There is a lack of information regarding the evolution of Chinese cotton production.

A summary table should be added in the introduction with data at national level regarding: acreage, production, yields and, if it’s possible, percentage of GM crops.

The adoption of GM cotton, in fact, has led to significant technological changes in terms of both production and environmental impact, so it cannot be ignored.

The discussion of the results is correct, but the conclusions must be improved and more concrete.

Finally, English language is good, but there are some mistakes, probably typing errors, so I suggest a careful re-reading of the text.

Reviewer 3 Report

1.      What is the main question addressed by the research?

The publication presented for review concerns the subsidization of cotton production in China. Already at the very beginning, an error is visible, the aforementioned error is the lack of a clearly formulated goal of the analyzes and hypotheses being carried out, I believe that this element should be changed.

2.      Do you consider the topic original or relevant in the field? Does it
address a specific gap in the field?

The topic is interesting, especially in the context of China's economic problems. For this reason, the article definitely deserves publication.

3.      What does it add to the subject area compared with other published
material?

The article points out the problems related to the subsidization of cotton production in China, moreover, interesting econometric models are used in it, allowing for a clear explanation of the discussed issues

4.      What specific improvements should the authors consider regarding the
methodology? What further controls should be considered?

The performed analyzes and the applied econometric methods are appropriate for this type of research. Therefore, I will not raise any critical remarks.

5.      Are the conclusions consistent with the evidence and arguments
presented and do they address the main question posed?

The conclusions are correctly formulated and refer to the previously conducted analytical process.

6.      Are the references appropriate?

The literature cited in the work corresponds to the current research status in the field of the discussed issues.

7.      Please include any assitional comments on the tables and figures.

Tables are formatted correctly and referenced appropriately in the text.

Reviewer 4 Report

The paper takes up a pertinent topic for research under WTO policy and perspective taking China as a case study for cotton. The paper is nicely structured and has a great scope for agricultual economics readership. The topic covers interestinc aspects of cotton subsidy (although there is little material on different subsidies and support related to cotton. The issues covered are mainly linked with domestic support under Agreement on Agriculture but would have been valuable if the relevant clause of agreement be spelled out. The methods are well-taken and applied aptly but some of the formulas just apperar in the running text that seem awkward and I would recommend using them in the form of equations (especially section 4.3). Findings on income effect of cotton subsidy in Table 2 should specify for which year/time period the data are involved. Same is true for production level impacts. The caption of Table 1 should contain country name as it is confusing as to for which country is meant. Section 6 is nicely presented but an addition of conclusion section would further add the value.

Minor:

There few typos and a thorough read would strike out such issues starting right from abstract, for example, subsidy word is duplicated in the last line of abstract, among few other places of the manuscript in relation to grammer etc.