Transcript Situation and Outlook of China`s WTO Accession On its Agricultural

Situation and Outlook of China’s WTO
Accession On its Agricultural Sector
By
Xiang Dong Qin
North Carolina Agricultural & Technical State University
Introduction
• China has finished all its WTO accession bilateral
and multi-lateral negotiations this month, it is
going to be a full member of the WTO late this
year.
• China will face serious challenges because many
of its domestic farm products are already priced
above those prevailed at the world market.
Introduction
• China’s agricultural/rural sector :
--Rural population: 70%
--Agricultural labor force: 50%
--Agricultural GDP: 18%
• Current protections provided to the domestic
agricultural sector include:
--Tariff and Non-tariff Border Measures
--State Trading and Domestic Policies
Short-Term Impacts of the WTO
Accession on China’s Agriculture
•
•
Three major factors:
--Tariff reduction
--Tariff-Rate-Quota
--Reform of domestic agricultural policies
Tariff Reduction:
--On average, tariff on imported agricultural
products will be reduced from 22% to 17%.
--Buck commodities such as grain, cotton and oil
seeds are subject to TRQs.
Tariff Reductions:Non-TRQ Commodities
Product
1998 MFN rate(in %)
Rate after adjustment(in %)
Soybeans
114
3
Wine
65
20
Citrus
40
12
Apples
30
10
Beef
45
12
Pork
20
12
Poultry
20
10
Average Tariff
31
17
Crops
Livestock
• Source: USTR(1999), Inside US Trade (1999)
Short-Term Impacts...
--The tariff reduction will encourage more legal
imports instead of smuggling.
• For Livestock Products:
--Beef Import is expected to grow slowly due to
price deferential
-- Pork import is expected to increase steadily
(mainly pork offal imports)
-- Poultry import will grow, in part because of the
demand of re-exportation (Japanese Market)
China's Pork Production and
Consumption, 1980-2005
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Quantity in Million Metric Tons
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
consumption
consumption projection
production
production projection
Source: Zhong, 1997; Qin, Amponsah and Peng 2000.
China's Pork Production and
Consumption, 1995-2005
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Per Capita Rural Per Capita Urban Total Production Total Consumption
Consumption (kg) Consumption (kg)
(MMT)
(MMT)
20.17
24.87
27.86
26.14
20.88
25.22
30.77
28.97
21.62
25.57
32.01
28.01
22.37
25.92
34.57
30.01
23.15
26.28
32.81
31.94
23.93
26.65
34.14
32.90
24.74
27.01
35.50
33.87
25.56
27.38
36.90
34.90
26.41
27.76
38.32
35.97
27.26
28.14
39.78
37.07
28.14
28.52
41.28
38.23
Source: Zhong, 1997; Qin, Amponsah and Peng 2000.
Short-Term Impacts…
• Tariff-Rate-Quota System
-- Due to food security concern (in China, food
security is equivalent to Food Self Sufficiency),
the TRQ in-quota quantities of grain are about
2.4% to 3.3% of total domestic consumption,
including seed and all other non-human uses.
TRQs for Cereals and Soybean Oil
1997/99
TRQ
Quantity Imports
(mmt)
(mmt)
Non-state Preferential TRQ tariff rate
TRQs
tariff rate
(ad valorem)
(%)
(%)
( %)
Product
year
Wheat
2000
2005
7.3
9.3
1.47
10
10
114.00
1.00
Maize
2000
2005
4.5
7.2
0.28
25
40
114.00
1.00
Rice
2000
2005
2.6
5.3
0.29
50
50
114.00
1.00
Soybean 2000
oil
2005
1.7
3.3
3.68
50
90
121.60
N.A.
Short-Term Impacts…
-- Cotton is still considered as a strategic
commodity, the TRQ in-quota allowed imports
will start at 743 TMT, and increases to 894
TMT in five years, with U.S. remaining as a
major supplier.
-- In quota tariff will be reduced from 3% to 1%, and
out of quota tariff will be cut from 76% to
40% in five years.
-- China is facing bollwarms problem in east
provinces (adoption of BT cotton)
Short-Term Impacts...
• Domestic Policy Reform
Domestic policies reform may lead to structural
adjustment in Chinese agriculture as government
control is loosen further. (e.g. suspensions of low
quality rice and wheat productions and
government procurement program in certain
provinces, which will potentially open rooms for
imports)
Structural Adjustment and Labor Migration
• The reallocation of resources may result in
improvement in efficiency and realization of
regional comparative advantage; it will also
lead to massive exodus of rural labor to urban
areas
(the excess labor in rural areas could
exceed 300 millions)
Regional Comparative Advantage and
Structural Adjustment
• There is substantial regional differences in
agricultural production and trade.
• The overall efficiency will be improved in Chinese
agriculture if domestic free trade is made possible
after the WTO accession.
Potential Long-Term Impacts of the WTO
Accession on China’s Agriculture
• The diminishing contribution of the agricultural
sector to China’s economy, from 1990 to 1997:
--the share of agricultural GDP declined from
27.1% to 18.7%
--the share of labor force in agriculture declined
from 60% to 50%,
Potential Long-Term Impacts...
• The possible solution: to free labor market, allowing rural
labors to migrate freely and to find employment outside
agricultural sector and in urban areas.
• Strategies:
--Government: encourage adopting and developing more
labor-intensive technology
--Encourage further structural adjustment in the whole
economy
--Technology innovation
Concluding Remarks
• Short-Term impacts on China’s agriculture is not
expected to be very significant;
• Reform of domestic policies may improve Chinese
agriculture in terms of resource allocation and cost
efficiencies;
• Long-Term impacts might be very significant due
to the small scale of the farm and high labor cost
per unit of product;
• More fundamental structural adjustment is needed
in the whole economy.