Sino-US Agriculture Trade and WTO Negotiations (Draft) Embassy of China, P.R. Weining Zhao March, 2005

Main Contents I. Sino-US Agriculture Trade II.Chinese Government Policy in Agriculture Production and Rural Development III.China’s WTO Negotiation Process IV. China’s Agriculture Laws and Regulations

I. Sino-U.S. Agriculture Trade

China’s Agriculture Import and Export 1) China has transited from a net agriculture product export country to net import country 3 years after entry into WTO. (Billion $) Year Export Import Ex-Imp (+18%) 18.93(+52%) (+9%) 28.03(+48%) -4.64

Sino-U.S. Agriculture Trade 2) China has become U.S.’s 4 th export market Year Export Import Ex-Imp (26%) 2.72(2%) (+25%) 5(+84%) (+18%) 5.97(+12%) (Billion USD)

U.S. Agriculture Product Export to China Quantity Value Quantity Value Soybean Wheat Cotton (unit: million metric tons & million USD)

II. Chinese Government Policy on Agriculture Production and Rural Development

1.Strengthened Production to Ensure Grain Security for Chinese Grain Security affects social stability, economical and national security As of 22% of the World population 1.3 billion people, and with only 7% of World arable land, grain security stands the top government agenda. After 4 consecutive year decline, grain production in 2004 reached 469 million metric tons

1.Strengthened Production to Ensure Grain Security ( Continued) Increase planting acreage: last autumn planted 700,000 hectares more of wheat than previous year, which might bring four percent of output increase for 2005 summer harvest. tap the potential of farmland by improving irrigation facilities and adopting advanced technologies. Scientific and technological applications should be promoted to foster improved breeds

Continued Medium-yield land, with a benchmark production of 5.4 tons per hectare, accounts for two-thirds of the country's total arable land. China will apply more technical and financial resources to upgrade this into high-yield land, which boasts a benchmark production of 7.7 tons per hectare.

2. A Stricter Protection of Arable Land China had 140 million ha of arable land in 1996 and now 126 million ha. Target: by 2010, to feed 1.4 billion people then, China should retain 128 million ha. Of arable land. The total reduced arable land should not surpass 6.4 million ha. And non agriculture arable land requisition should not surpass 2 million ha.

3. Relieve Farmers’ Burden & Increase Farmer’s Income Direct subsidies for grain growers. In 2004, 600 million farmers in 29 province received 11.6 billion yuan (1.45 billion $) In 2005, 11.6 billion yuan plus 10% will be paid to grain growers. And 5.5 billion yuan (66 million $) will be subsidized to govmt of 800 graincnty

Continued Tax cuts and exemptions. China announced in 2004 exemption of all agri-tax in 5 years. Up to now, 26 provinces have already cut and exempted agri-tax. By 2006, all of country will exempt farmers of agri-tax,which is annually 40 billion yuan (5 billion USD)

III. China’s WTO Negotiation Process & Stands

1. China ’ s WTO Commitments in Agriculture 1) Reduce tariffs on agricultural goods of greatest importance to U.S. farmers from a 1997 average of 31 percent to 14 percent. 2) Establish annual tariff-rate quotas (TRQs) for import of selected key commodities. TRQs are at low tariffs ranging from 1 to 9 percent. Quotas were initially set for years for most commodities (through 2005 for vegetable oils).annual tariff-rate quotas

Continued 3) Eliminate export subsidies. 4) Limit non-commodity-specific trade-distorting domestic agriculture support to no more than 8.5 percent of total agricultural output value. In addition,China must limit commodity- specific support to any given commodity to no more than 8.5% of that commodity's total value of production.

Continued 5) Apply science-based sanitary and phytosanitary standards to all agricultural goods, including grains, meats, and fruits. 6) Publish regulations governing trade and policy. 7) Open China's distribution and service sectors to foreign-owned firms.

2. China’s Performance "I would give China's performance a top score," (Supachai Panitchpakdi, director-general of the WTO) China deserves due recognition for the tremendous efforts made to reform its economy to comply with the requirements of the WTO. –quote from USTR Report

Chinn’s Performance (Continued) 1) Tariff: The average tariff on farm products has been lowered to 15.6 per cent, far below the 54 per cent that was evident before entry and the average world rate of 62 per cent. 2) Annual Tariff Rate Quotas: Wheat: Million tons; Corn:7.2 million tons; Rice 5.32 million tons; Cotton: million tones. (7.2; 1.9 )

China’s Performance (Continued) 3) Has eliminated all export subsidies 4) China ’ s agricultural support is far less than 8.5% of total agricultural output value. An example in 2004: Green Box: direct subsidies to grain growers 11 billion yuan(1.35 bln $) 230 mln yuan(27 mln $) qualty. Info. Amber Box: Seed subsidies 2.85 billion yuan (340 mln $); farm machinery subsidies 70 million yuan (8.5 mln $) and 400 million (48 mln $) from local

China’s Performance (Continued) Agricultural tax cut 40 bln yuan. Agriculture output value: 2000 bln 5) Apply science-based sanitary and phytosanitary standards to all agricultural goods, including grains, meats, and fruits. 6) Publish regulations governing trade and policy. 7) Open distribution and service sectors to foreign-owned firms.

3. China’s Stands in WTO Agriculture Negotiation

Participating Institutions Participating Institutions China takes a very active part in Doha round agriculture negotiations. Negotiation representatives from MOFCOM and Ministry of Agriculture under which MOA Agriculture Trade Promotion Center. Consultant Group consisting of Chinese experts.

China ’ s Stand in WTO Negotiation Aim: 1) Improvements in market access; 2) Reduction of, with a view to phasing out, all forms of export subsidies; 3) Reductions in trade-distorting domestic support and agriculture product tariff. 4) Phasing out tariff peak, tariff upgrading and complex tariff. 5) Substantially address the special & differential treatment for developing Ctri.

China ’ s Stand (Continued) The Present Situation in China: China has eliminated all export subsidies; China’s domestic support AMS = 0 Low tariff and large quantity of TQ; China does not have peak tariff, but simple form of tariff at low level.

China ’ s Stand (Continued) China’s Stand: In the Area of domestic support: 1) China supports substantial reduction in trade-distort support in amber box; 2) Restrain general support from amber box, blue box & de minimis 3) Reduce income payment in blue box 4) Strengthening discipline on support measures in Green Box

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