Opening up, technical barriers lead to deficit
Zhi Ming  Updated: 2004-08-21 08:27

China logged an agriculture trade deficit of US$3.73 billion in the first half of this year, according to the Ministry of Agriculture (MOA).

Accounting for 13.5 per cent of China's agricultural trade volume - US$10.62 billion for exports and US$14.35 billion for imports - in the same period, the deficit is definitely a cause for concern.

But the figure itself is not so alarming as the tracking of it augurs.

According to the MOA's Agriculture Trade Promotion Centre, China has seen an agricultural trade surplus of US$4.3 billion a year on average from 1995 to 2003.

The current deficit, for the first time in a decade, signals the surplus scenario may not be sustainable given the fundamental changes in the international trading regime.

China's entry into the World Trade Organization (WTO) in 2001 was the watershed event dividing the surplus-deficit line. It has rendered the country more general trading opportunities in the international market while giving foreign agricultural brokers more chances to enter China.

Given an understandable time lag caused by the implementation of WTO rules, the impact of the entry began to surface this year.

Experts say the situation may not become a trend. But their reserved wording shows they are not sure about the future.

Around China's accession to the WTO, both domestic and overseas research institutes have been haggling over its impacts on China's farmers. Divided on details, they nonetheless say the country will face increasing pressure as it mends its pace to open up its domestic markets, including the agricultural market under the WTO arrangements.

China's average tariffs for agricultural products decreased from 21.2 per cent before the WTO entry to 16.8 per cent by the end of 2003. It will be further lowered as the country opens the sector wider.

Meanwhile, its trade surplus last year dropped by 56.2 per cent over the previous year, setting the stage for the present deficit.

China is an agriculturally weak power, and so its continual opening up to fulfil its WTO commitment means the deficit pressure will be a long-term one.

WTO, however, is certainly not the sole reason behind the changing scenario in China's agricultural trade scenario.

The bird flu epidemic early this year that upset Chinese exports of agricultural products is a factor.

More important, developing countries face an unfair international agriculture trade regime in which farmers of developed countries are greatly advantaged with their governments granting huge amounts of trade-distorting subsidies, which, it is estimated, can amount to an astronomical US$300 billion.

This has been a fundamental obstacle to the smooth progress of global trade talks.

On August 1, a breakthrough deal in the Doha global trade round was struck, which, agreed by the WTO 147 members, commits rich countries to cutting billions of dollars in farm subsidies.

If honestly implemented, the interim accord will pave the way for more open markets for agricultural products in the developed world.

But analysts said the commitment to eliminate export subsidies was missing substance since no end date was mentioned.

It is predictable the road to a fairer global trade system for poorer developing countries will be a bumpy one.

A noticeable trend is seen in the developed nations. While losing some of their traditional strongholds in the global trade system as trade liberalization proceeds, they have resorted to other means, such as technical and hygiene barriers to protect domestic farmers.

Japan's repeated blocking of agricultural imports from China this year, for example, should raise new concerns for Chinese farmers and policy-makers.

(China Daily)

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