Since joining the WTO, China's agricultural development and the new round of negotiations

Author: Ke Bingsheng / Country: Mainland China
Publisher:
Publishing Date: 2005-04-01
Features: [Excerpt:] For the analysis of China's agricultural development after joining the WTO, the first step should be to examine the changes in policies. The logical relationship of the impact of joining the WTO on China's agricultural development is as follows: After joining the WTO, China will strictly adhere to the relevant agreements of the WTO (WTO legal documents and provisions) and fulfill the commitments made upon joining the WTO. To this end, China's trade policies and domestic policies will be adjusted accordingly. These policy adjustments will affect the import and export of agricultural products. Changes in policy and import and export will, in turn, impact the prices of domestic agricultural products. Changes in agricultural product prices will further lead to changes in farmers' income, agricultural production, and rural employment. Of course, it should also be pointed out that there are many factors influencing the development of China's agricultural policies, and joining the WTO is merely one of the important factors. Even without the event of joining the WTO, China's agricultural policies would still undergo significant changes. The following discusses some important changes in China's agricultural policies in recent years, some of which are directly related to joining the WTO, while others are not necessarily linked to it.
I. WTO Rules on Agriculture
After joining the WTO, it is necessary to abide by the WTO rules. The specific rules of the WTO are reflected in the legal documents agreed upon during the Uruguay Round. Strictly speaking, all of the WTO's agreements are related to agriculture to some extent. However, some agreement provisions are more closely and directly related to agriculture. Among them, the "Agreement on Agriculture" and the "Agreement on the Implementation of Sanitary and Phytosanitary Measures" are directly aimed at agricultural issues. In addition, the "Agreement on Anti-Dumping," the "Agreement on Subsidies and Countervailing Measures," and the "Agreement on Safeguard Measures" are also closely related to agriculture.
(1) "Agreement on Agriculture"
The "Agreement on Agriculture" contains a large number of provisions, including 21 articles and five annexes across 13 chapters. However, its main content revolves around three aspects: regulating and reducing commitments related to market access, export subsidies, and domestic support policies. These three aspects constitute the "three pillars" of the Agreement on Agriculture. China's agricultural issues during the accession negotiations and the new round of negotiations also revolved around these three aspects. The main goal of the WTO is to promote free trade, making market access one of the most important issues. The "Market Access" provisions in the Agreement on Agriculture primarily involve the tariffication of non-tariff barriers, tariff reductions, tariff quotas, and exceptions to tariffication.
Tariffication. One of the most significant achievements of the Uruguay Round in agricultural market access negotiations was the tariffication of trade protection measures. The Agreement on Agriculture requires tariffs to be the sole means of restricting agricultural imports, meaning that members can only use tariff measures to control agricultural import and export. Existing non-tariff measures, such as the import quantity limits, import bans, minimum import prices, import licenses, non-tariff measures maintained through state trade, and voluntary export restraints mentioned earlier, should all be converted into tariffs.
Second, tariff reductions. According to the Agreement on Agriculture and related provisions, each member commits to reducing its agricultural tariffs (including tariffs resulting from the tariffication process) to a certain level within the agreed implementation period. Specific rules stipulate that, with 1986-1988 as the base period, tariff reductions will be implemented annually starting in 1995. Developed countries will reduce their average tariffs by 36% over six years, while developing countries will reduce them by 24% over 10 years. Least-developed countries are not required to make reductions.
Third, tariff quotas. To address issues of excessively high tariffs, a minimum market access is established through tariff quotas. Members using tariff quotas must commit to annual tariff quota access quantities. Imports within the quota are subject to a lower tariff rate (i.e., the in-quota rate), while imports exceeding the quota access quantity are subject to a higher tariff rate (i.e., the out-of-quota rate). According to WTO rules, tariff quota access quantities must be maintained at the current actual market access level, specifically not less than the average import volume over the past three years. If this import volume is less than 3% of the domestic average consumption, the quota quantity should be determined at 3% of consumption, with a commitment to a certain incremental amount, reaching 5% of domestic consumption by the end of the implementation period.
Fourth, special safeguard measures. In certain exceptional circumstances, special safeguard measures can be taken to restrict the import of products that have already undergone tariffication, to prevent a sharp increase in import volumes and a significant drop in import prices. To use special safeguard measures, the following three conditions must be met: ① The product must have undergone tariffication; ② It must be a product noted in the member's tariff concession schedule as eligible for special safeguard measures; ③ It must meet the trigger thresholds based on price or quantity. Implementing special safeguard measures does not require compensation. This is a significant difference from safeguard measures. The special safeguard clause remains in effect until a new round of negotiation agreements is reached.
Domestic support refers to various fiscal expenditure measures implemented by governments to support and subsidize agriculture and farmers through domestic policies. Domestic support is very broad in meaning; any government expenditure related to agriculture and farmers falls under domestic support measures, including price support for agricultural products, subsidies for agricultural inputs, direct subsidies to farmers, as well as government expenditures on agricultural research, extension, training, infrastructure construction, poverty alleviation, ecological and environmental conservation, and so on. Due to the wide variety of domestic support measures, their effects differ significantly, so differentiated treatment is adopted. For simplicity, people these different categories of domestic support policies as "green box" policies, "yellow box" policies, and "blue box" policies.
The "green box" policy refers to those policies that have no impact or only a very minor impact on production and trade. The Agreement on Agriculture does not require the reduction of these policies and does not restrict their future expansion or strengthening. The "yellow box" policy refers to those policies that directly distort production and trade, such as price support policies, which need to be limited and gradually reduced. The "blue box" policy is a special case of the "yellow box" policy, referring to price support measures that also limit production area, livestock headcount, and product output. The "blue box" policy is also excluded from the reduction calculations. If the amount of domestic support is very small, it does not need to be included in the calculations or reductions, referred to as "de minimis." The de minimis allowance for developed countries is 5%, while for developing countries, it is 10%. The de minimis allowance includes two levels: first, specific de minimis, which means that if the "yellow box" domestic support for a specific product does not exceed 5% of that country's total output value for that year, it does not need to be included in the calculations or reductions. Second, non-specific de minimis, which means that if the "yellow box" domestic support that is not specifically targeted at a particular product does not exceed 5% of that country's total agricultural output value, it also does not need to be included in the calculations or reductions. For "yellow box" policy expenditures exceeding the de minimis allowance, developed countries will reduce them by 20% over six years, while developing countries will reduce them by 13% over 10 years.
Export subsidies refer to subsidies provided based on the performance of agricultural exports. They differ from domestic support, which refers to various forms of support and assistance provided by member governments to agricultural producers, such as government subsidies for agricultural inputs and income support for farmers. According to the Agreement on Agriculture, developed members will reduce export subsidies by 36% over six years, while developing members will reduce them by 24% over 10 years.
(2) "Agreement on the Implementation of Sanitary and Phytosanitary Measures"
The "Agreement on the Implementation of Sanitary and Phytosanitary Measures" is closely linked to the "Agreement on Agriculture." It is formulated to protect the life or health of humans, animals, and plants. According to the agreement, if importing foreign products threatens the life or health of humans, animals, or plants in the domestic market, the government can impose trade restrictions, which is in line with WTO rules. The agreement also stipulates that the conditions for taking such measures are scientific evidence and non-discrimination. The purpose of the Sanitary and Phytosanitary Agreement is to ensure food safety and protect animal and plant health. The agreement includes the following measures: measures to protect animals and plants from pests and diseases, measures to protect humans and animals from risks (such as residues of toxins and pesticides) in food and feed, and measures to protect humans from diseases carried by animals (such as anthrax and rabies). The agreement allows governments to take necessary measures for this purpose. However, these measures can only be used to protect life and health and must be based on scientific evidence. If there is a lack of scientific evidence, they cannot be used. This means that the implementation of sanitary and phytosanitary measures must undergo detailed experimental testing and analysis, and it must be determined that they truly affect food safety or pose a serious threat to animal and plant health before they can be used. Before sufficient scientific conclusions can be drawn, governments can impose temporary preventive restrictions.
The standards for implementing sanitary and phytosanitary measures can be chosen from two options: first, adopting existing international technical organization standards, guidelines, and recommendations, including: the Codex Alimentarius Commission of the Food and Agriculture Organization of the United Nations and the World Health Organization, standards of the World Organization for Animal Health, and standards of the International Plant Protection Convention. Second, adopting a higher level of protection, provided there is scientific evidence or the agreement estimates that the risk truly requires such appropriate protection. When implementing sanitary and phytosanitary measures, the principle of non-discrimination must be followed, meaning that the same standards must be applied to imported and domestically produced products.
(3) "Agreement on Subsidies and Countervailing Measures," "Agreement on Anti-Dumping," and "Agreement on Safeguard Measures"
The "Agreement on Subsidies and Countervailing Measures" defines subsidies as various forms of assistance provided by governments or private entities commissioned by governments to exports, including grants, loans, equity purchases, loan guarantees, tax exemptions, and tax transfers. Subsidies include both direct government support to businesses and support provided by private entities commissioned by governments. Subsidies are divided into specific subsidies and non-specific subsidies. Specific subsidies refer to subsidies to certain specific enterprises, including: ① subsidies to one or more enterprises; ② subsidies to one or more industries; ③ subsidies to certain enterprises or industries in designated regions; ④ subsidies based on export performance or import substitution. Non-specific subsidies refer to subsidies provided by government agencies that establish clear and objective standards, and as long as the standards are met, the subsidy qualification is automatically granted. Objective criteria or conditions refer to neutral economic standards or conditions, such as the number of employees or the size of the enterprise, rather than favoring certain enterprises. Different measures are adopted for different subsidies: ① Prohibitive subsidies. These refer to subsidies based on export performance or import substitution. Such subsidies are strictly prohibited. ② Actionable subsidies. These are subsidies that are not prohibited but can be challenged. The three types of specific subsidies other than those based on export performance can be challenged and fall into this category. ③ Non-actionable subsidies. These include two situations: first, non-specific subsidies; second, three exceptions of specific subsidies: , basic research conducted by the enterprise itself or commissioned by research institutions (subsidizing 75% of the cost) or pre-competitive development research (subsidizing 50% of the cost); second, non-specific subsidies to enterprises in lagging regions (clearly defined by regulations); third, one-time subsidies for improving existing facilities to meet new environmental regulations (subsidizing 20% of the investment cost).
The core content of the "Agreement on Anti-Dumping" can be summarized into three parts: how to identify dumping, how to identify the harm caused by dumping, and the anti-dumping procedures. If a product is exported at a price lower than its normal value, it is considered dumping. Normal value refers to the comparable price of similar products in the market of the exporting country. If there are no comparable similar products in the domestic market of the exporting country, or for special reasons such as excessively small sales volume, a reasonable comparison is not allowed, two alternative methods can be adopted: ① comparing the representative export price sold to third countries; ② determining the comparable price based on the production cost in the producing country plus reasonable management, sales, and profit costs. The agreement also acknowledges that price comparisons for non-market economy countries may be particularly difficult, and therefore, the importing country may consider it inappropriate to conduct strict price comparisons as described above. In other words, the importing country may not recognize the results and conclusions of such price comparisons.
Regarding how to identify harm: Harm refers to "substantial injury," "substantial injury threat," or "substantial obstruction to the establishment" of the domestic industry. The determination of harm must be based on clear evidence and take into account two aspects: ① the quantity of dumped products and their impact on the price of similar products in the importing country's market; ② the impact of these imports on domestic producers of similar products. If, after investigation, dumping is found, anti-dumping measures can be taken, such as imposing anti-dumping duties.