U.s. Ni China Trade

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U.S. - China Trade in Soybeans Meng Yuan Author Note This paper was prepared for Econ 4431W, taught by Professor Sahi. I. Introduction Soybeans are the primary American export to China, and currently the soybean trade between the U.S. and China is stable. China is the number one soybean buyer of U.S. soybeans. At the same time, soybeans account for more than 50 percent of the total U.S. agricultural exports to China, which also plays an important role in China-U.S. trade. The U.S has an absolute advantage in soybean production. The subsidies to the soybean producers in the U.S. affects the trade, as a consequence, the U.S. exports more soybeans to China. Soybean trade between the U.S and China has a long…show more content…
In 1995, the American government began paying large subsidies to soybean producers, which greatly affected both soybean production in the U.S. and the soybean trade with China. This inspired me to do research about the policy change. I test the impacts of subsidies on soybean producers in the U.S. and the effects on trade. Based on the soybean trade history between the U.S. and China, I research why China imports soybeans from the U.S and whether the subsidy can increase the exports of US soybeans to China. For my analysis, I apply Adam Smith’s theory of absolute advantage to soybean production in the U.S. Using this model, I analysis the productivities of both countries to determine whether the U.S. has the absolute advantage in the production of soybeans. I also use the data to see whether the Adam Smith’s theory conforms to real situations or not. Secondly, I interpret the data of soybean subsidies, soybean exports and soybean prices in the U.S. to investigate how the subsidies effects on exports and prices. More concretely, I employ a regression analysis to show the impacts that the subsidies to the soybean producers in the U.S. have on trade and prices. My hypothesis is that the subsidies to soybean producers in the U.S. can decrease the soybean prices but increase the soybean exports from the U.S. to China. II. Absolute Advantage in Soybean Production Soybeans are the primary American export to China. Why is China be the number one
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