China National Consultation on Special Products (SPs) and the Special Safeguard Mechanism (SSM)

29th March 2007 • Co-organised with Agricultural Trade Promotion Centre; The International Centre for Trade and Sustainable Development; The Permanent Mission of China to WTO

Discuss this eventShare your views with other visitors, and read what they have to say

The International Centre for Trade and Sustainable Development (ICTSD), Agricultural Trade Promotion Centre and the Permanent Mission of China to WTO jointly organised the China National Consultation on Special Products (SPs) and the Special Safeguard Mechanism (SSM) on 29 March 2007 in Beijing. Over 30 representatives from the State Council, the Ministries of Commerce, Finance and Agriculture, as well as the private sector and NGOs attended the dialogue.

As it has been recognized that SPs and SSM are crucial for delivering on the developmental goals of the Doha Round, discussion on the selection of SPs and the setting of SSM in China have been carried on intensively during the dialogue, especially in the perspective of food security, livelihood security and rural development.

The Importance of Agriculture

Most of the speakers have emphasised that China is a major agricultural developing country. The sector not only ensures food security and provides the foundation for the existence and development for the majority of the country’s population; it also provides a source of income and livelihoods for 900 million rural residents. Ensuring food security has always been a top priority for the government. Although China’s economy has been growing rapidly in recent years, agriculture is still of great importance to the national economy. In 1978, it accounted for 28.1 percent of Gross Domestic Production (GDP) and represented 70.5 percent of national employment. By the year 2005, agriculture still accounted for 12.5 percent of China’s GDP and 43 percent of all jobs in the nation. Agriculture will remain the foundation of the national economy for the foreseeable future.

Three major characters of Chinese agriculture have been highlighted in the dialogue. Firstly, Chinese Agricultural production is predominantly family-based and small-scale (252 million farming households in 2005). Secondly, China’s agriculture is diversified and regionalised due to the variability of agricultural resources and climate conditions, as well as the small scale of production. Thirdly, hidden unemployment is high in rural areas, farmers’ incomes remain low, and a large income gap prevails between rural and urban dwellers. Low incomes and the lack of basic social security make farming the country’s toughest livelihood issue.

Agricultural Trade and Productivity

Some participants have believed that Chinese agriculture in general, and bulk commodities in particular, lack competitiveness. Restructuring is difficult and costly, and trade liberalisation has extensive and far-reaching impacts on the sector. Agriculture relies heavily on natural resources, particularly land and water, which are limited in China. In light of the high proportion of the population that lives in rural areas, weak resource endowment and the prevalence of small-scale farming, Chinese farmers are clearly disadvantaged, and the country’s long-term agricultural trade balance is expected to remain negative.

Moreover, China is still facing the challenge of maintaining a balance between supply and demand. It has been pointed out that the key to preserving a balanced outcome between agricultural trade and domestic agricultural development is to retain a tariff level that prevents sharp domestic price declines as imports increase. Since the inception of the reform and opening-up policy, the overall productivity of agriculture has registered remarkable improvement, with impressive increases in grain, cash crops, animal husbandry and aquaculture outputs.

Consequences of WTO Accession

It has been stated that, in its WTO accession process, China undertook comprehensive and substantial commitments and opened its agricultural market to a great extent. As a result, its average agricultural tariff level declined by 66 percent, from 54 percent in 1992 to 17.9 percent in 2001. After the WTO accession, the average farm tariff in China has been further lowered to 15 percent, or less than one-fourth of the world average.

Through reducing agricultural tariffs by 72 percent in total since the start of its accession process, China has exceeded the overall tarif cut commitments undertaken by other Members under the Uruguay Round plus the cuts to be projeted for this round. In addition, China’s tariff structure is flat and simple, with no obvious tariff peaks, and the highest tariff is much lower than that of most other Members. Tariffs on almost all agricultural products are bound in ad valorem terms, and tariff rate quotas (TRQs) are large for major products such as grain, cotton, edible oil and sugar. In-quota tariffs are very low, ranging from one to five percent, while the highest over-quota tariff is only 65 percent. In this sense, some Chinese experts have argued that China has become one of the most open agricultural markets in the world.

A consensus has been reached that the special characteristics of Chinese agriculture make it imperative for the country to minimize the negative impacts of trade liberalisation by seeking effective flexibility in the Doha Round agricultural negotiations. Special Products and the Special Safeguard Mechanism are vital to ensure food security, farmers’ livelihoods and rural development in China.

Media report (Chinese), see
http://ictsd.net/i/news/dialogue-chinese/18119/

Chinese Version