China should adopt an income insurance approach to agricultural insurance based on the US model, argues Xu Xuegao 徐雪高 Jiangsu Academy of Agricultural Sciences Institute of Agricultural Economics and Development researcher and Qi Haotian 齐皓天 Huazhong Agricultural University School of Economics and Management professor in a 26 April 2017 editorial in Farmers’ Daily.

According to the scholars, the following two factors make the US approach to agricultural insurance an effective model

  • agricultural income insurance can be heavily subsidised while remaining compliant with WTO ‘green box’ standards if
    • insured income is only from agricultural sources
    • insurance only covers losses exceeding 30 percent of average gross income (or an equivalent amount of net income) where average income is determined by past income levels
    • insurance payouts combined with any other payments from natural disaster relief programmes do not exceed 100 percent of producer’s total loss
  • agricultural income insurance allows for public-private partnership
    • US insurance companies failed to build sustainable agricultural insurance based on a purely private model
    • the US Federal Crop Insurance Corporation (FCIC) provides reinsurance and subsidies on eligible crop insurance contracts sold by 17 private companies
    • government and private companies share profits or losses

Xu and Qi argue that policymakers should

  • launch pilots on agricultural income insurance
  • design income insurance pilots to be WTO compliant
  • learn from US policy and public-private partnership design
  • take an active role in reshaping WTO rules on agriculture in future negotiations