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WTO Entry Impacts China's Agriculture: ExpertChina's expected entry into the World Trade Organization (WTO) will greatly affect the country's agricultural sector, said Chen Baodong, a researcher with Guangda Securities Research Institute in Shenzhen, Guangdong Province. China will soon engage in free international trade of agricultural products, which means its agriculture will be subject to global changes in prices, market accessibility, trade structure and trade rules concerning agricultural products, Chen said.The country will also have to fulfill the obligations it committed to during the 13-year negotiation for WTO membership. According to Chen, the positive impacts are obvious: China will benefit from the preferential treatment in free trade, especially in tariff reduction, enjoyed by all signatory countries to the General Agreement on Tariff and Trade, the predecessor of WTO. China will unconditionally obtain the most-favored-nation status with all WTO members. These will give China a better opportunity to tap international agricultural resources and markets. The entry will help China accelerate its agriculture reform and establish an agriculture macro-control system compatible with the market economy, thus enhancing the production of agricultural products and sharpening the competitive edge of China's farm products in the international market. As a member state, China will have a better chance to protect its own trade interests. It will be eligible to resort to relevant WTO clauses and its mechanism to resolve disputes to protect its domestic agricultural production and market against the dumping of foreign farm produce. China is also qualified to participate in multilateral trade negotiations to fight protectionism in trade of farm products. The WTO membership will also dramatically reduce the amount of unfair treatment imposed on China's agricultural sector by other countries, including non-tariff restrictions against China's exported farm products, thus facilitating their accession into the world market and expanding their market shares. Like a double-edged sword, entry to the WTO also brings some negative impacts on China's agriculture: China will have to open its domestic market and revoke all non-tariff restrictions on imported farm products. As the government's protective policies on domestic farm products begin to be phased out, foreign farm products at lower prices are set to pose great challenges to their Chinese counterparts. The flood of foreign farm products into China will put heavy pressure on the country's foreign exchange reserve, the financial source of imports. The scale of influence of China's WTO entry varies with different farm products such as grain, wheat, edible oil, cotton and wool. As global demand for grain keeps increasing, its price has risen steadily in the world market. The trend gives China a good chance to promote its grain production and exports. The Chinese Government has therefore decided to increase its investment in the agricultural sector and increase the supply of domestic farm products. During the Uruguay Round of Talks, some WTO members, such Japan, the Republic of Korea, the European Union, and the United States, promised to open their markets wider and phase out their protective policies on grain products. This will be conducive to China's grain exports. Increasing wheat prices on the world market will force China, one of the world's biggest wheat buyers, to reduce imports and rely more on domestic wheat supply. During the Uruguay Round of Talks, the United States and the EU, both China's long-time wheat suppliers, promised to reduce government subsidies on wheat farmers, causing price hikes in their exported wheat. So, China will have to turn to other countries such as Australia and Argentina, that could supply wheat at stable and relatively low prices. China is a major edible oil producer in the world. Yet because of inefficient processing technology and high production costs, domestic supply has fallen short of demand. In the foreseeable future, China will remain an importer of the product. Domestic edible oil producers will face greater pressure from their international counterparts. China's current annual cotton output is about 4.25 million tons, compared to 5.52 million tons that are needed. Under the agreement reached during the Uruguay Round of Talks, China is allowed to increase its textile exports. The country's rapid economic development will also increase demand for cotton in the next few years. To make up for the cotton shortages, the country will have to expand cotton imports. This, in addition to increasing cotton prices on the world market, will aggregate the burden on China's foreign exchange reserve. On the positive side, higher cotton prices on the world market will help stimulate domestic cotton production, which in return, may boost cotton supply. With the reduction of government protective policies, China's wool industry is bound to suffer dearly as it is no match to that of Australia in terms of product quality and production scale. The gap between sugar supply and demand will remain for a long time. To satisfy a growing domestic consumption, China will continue to be a major sugar importer in the world, increasing the burden on its foreign exchange reserve. It is worth mentioning that the entry into WTO does not necessarily mean that foreign farm products will soon prevail on the Chinese market. If appropriate tariff rates and quotas for agricultural produce are set, China's agricultural production and farm products market will be slightly afflicted with or completely clear of the influence of fluctuations in the international market. During the negotiations with other member countries, China should uphold its position to join the WTO as a developing country and only fulfill its obligations. The country should also work out a rational tariff rate that can best protect its national interests, the researcher said. (China Daily)
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