Farmers help cut agro-trade deficit

By Xin Zhiming (China Daily)
Updated: 2007-01-09 07:26

When he brought Chinese soybeans to North America in the 1760s, British seaman Samuel Bowen could not possibly have anticipated the revolutionary impact he would have on the history of agriculture and farm trade.

About 250 years later, soybean imports, a large portion of which are from the United States, make up 60 percent of China's soybean consumption.

Soybeans, which Chinese began to plant about 5,000 years ago, have raised serious concerns about China's ability to compete in the global agricultural market as it exits the World Trade Organization (WTO) transition era.

Five years ago when China joined the WTO, its agricultural sector was considered its weakest link. Concerns were raised that the country would be battered by an influx of lower-cost foreign products.

But now statistics indicate that those who had concerns may have underestimated Chinese farmers.

"The WTO's impact on China's farm trade is not that obvious," said Ye Dongya, researcher with the School of International Trade and Economics at the University of International Business and Economics.

The volume of its farm trade has been growing. Last year, it was $55.8 billion, double that of 2001, the year China joined the WTO.

This year, it is expected to exceed $60 billion, according to Weng Ming, researcher with the Rural Development Institute at the Chinese Academy of Social Sciences (CASS).

Weng said that China has been restructuring its farming sector, putting more resources into labor-intensive products on which it has a comparative advantage, such as vegetable and fruits.

Intensified competition in the wake of its WTO accession has also sharpened the edge of Chinese farmers, who have provided low-cost and quality products for overseas markets, Weng said.

China's WTO accession has brought some changes and uncertainties, however. One of those is a trade deficit in agricultural products.

In 2004, for the first time since its WTO accession, China suffered a $4.64 billion deficit in farm product trade. The next year, it was $1.47 billion, 68 percent lower, and in the first 10 months of last year, it surged again to $2 billion.

But Cheng Guoqiang, senior agricultural expert with the State Council's Development Research Center, said the deficit may come to be regarded as a "normality" in the years ahead.

There is precedent for China's situation. Cheng said the experiences of Taiwan Province, South Korea and Japan, all industrialized economies, indicate a country goes through a period when it needs to import grain to make up for its shortage of raw materials (such as cotton and soybeans) as it steps into the stage of industrialization.

Weng agreed, saying: "A deficit in farm trade is inevitable."

Given its scarce land and water resources, China is at a disadvantage in growing grain, and "this is the fundamental factor of the deficit," Weng said.

Furthermore, if China is looking to increase its farmers' income, grain is not a good choice because of its relatively low price. One farmers shifted to more profitable crops, imports had to be increased to fill the gap, and that becomes a politically sensitive issue.

Soybeans are in a similar situation. China's annual soybean output is about 18 million tons, and imports last year amounted to 26.18 million tons. Because China's oil presses can handle 60 million tons, imports are a natural response, Ye said.

What's more, imported soybeans contain more oil about 2 percentage points higher in terms of oil content and are not more expensive even with shipping costs included. Therefore, dealers aren't concerned about importing, especially with the demand in China as high as it is, Ye said.

Despite its large volume, soybean imports should not become a barometer of the WTO impact on China. For one thing, the soybean market opened up in 1996, five years before China joined the WTO.

The forecast is that China's farm trade will continue to grow at a fast pace.

The Ministry of Commerce has planned for China's agricultural exports to be controlled at around 7 percent and for more emphasis to be put on improving the quality of the products.

(China Daily 01/09/2007 page4)

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