An economic analysis of EU-China agricultural trade relations

Agricultural trade relations between the EU and China are promising given the background of a rising trend of global economic and trade development. This study is conducted within the framework of international trade theories, global economic and trade development especially in terms of agricultural trade, as well as agricultural and trade policy of both the EU and China. Within the trade theoretical framework and the policy framework, this study adopts both quantitative and qualitative research methods to analyse EU-China agricultural trade relations from the perspectives of comparative advantage, trade complementarity, trade potential, and policy recommendations. Specifically, Balassa’s Revealed Comparative Advantage Index (BRCA), a Normalized Comparative Advantage Index (NRCA) as well as a Trade Complementarity Index (TCI) are employed to quantify the degree of comparative advantage and trade complementarity for the EU and China in relation to defined agricultural products. Based on NRCA- and TCI-based preliminary results, an OLS regression analysis, a Markov one-step transition probability, and a mobility index are also applied in order to analyse the dynamics of agricultural trade specialization for the EU and China respectively. An international trade gravity model is also utilized to investigate the influence of selected economic factors (i.e. the geographic distance, institutional distance, GDP, etc.) on agricultural products’ trade flows from the viewpoint of the EU. The results are carried out under the help of three econometrics estimation models, i.e. a Pooled OLS model, LSDV model, and FGLS model. In addition, by using an econometrics prediction function, the agricultural trade potential has been estimated at EU member country level vis-à-vis China. Combining all the research results of this study, agricultural trade policy recommendations for both the EU and China are carried out by applying Porter’s SWOT analysis tool. In general, this study has confirmed that there are still many unexplored agricultural trade opportunities between the EU and China and the EU-China economic relationship could be further strengthened by developing their promising EU-China agricultural trade relations, and working on reducing or even eliminating many barriers that impede EU-China agricultural trade development