Training session - Vietnamese agriculture and WTO - Hanoi - sept. 20051 The accession of China

Training session - Vietnamese agriculture and WTO - Hanoi - sept. 2005 1

The accession of China


History• China was one of the 23 original signatories of GATT (1948)• 1949: Chinese revolution

– Gov in Taiwan announced that China would leave the GATT system– Gov of People’s republic of China never recognized that

• 1986: China notified the GATT of its wish to resume its status of GATT contractory party

• 1987: Establishment of the Working party• 1995: Become a WTO Working party• Sept. 2001: End of the negotiations• Nov. 2001: Doha Ministerial Conference agreed for the

China’s membership. China became the 143rd WTO member


Why a so long process ?

• China’s weight in international trade of goods– 7th leading exporter– 8th larger importer

• China’s weight in international trade in services– 10th leading exporter– 12th larger importer

• Legal text of accession: 900 pages long


The results:The China’s commitments

Focus on agriculture


Transparency

• Only laws and measures published and available to WTO members shall be enforced

• Official journal dedicated to publication of laws, on a regular basis

• Establishment of an enquiry point


Judicial review

• Establishment or maintain of tribunals for all administrative actions

• Tribunals are impartial and independent from agency entrusted in the administration of trade and economic policies


Non discrimination

• Foreign enterprises/individuals: treatment not less favoured that domestic ones in respect of:– Procurement of inputs/goods/services– Conditions of sale of their goods/services– Prices and availability of goods/services

supplied by national authorities or State enterprises (transportation, energy, …)


Right to trade

• Within 3 years after accession– All enterprises in China shall have the right to trade in all

goods within China customs territory

• Exception for products submit to state trading– Imports

• Grain, vegetal oil, sugar, tobacco, chemical fertilisers, cotton

– Exports• Tea, rice, corn, soybean, silk, cotton


State trading

• Import purchasing procedures of State trading enterprises (STEs) are fully transparent;

• Provide full information in the pricing mechanisms of STEs for export.


Phased elimination of non tariff measures• Elimination of import quotas and import licenses:

– Upon accession• Sugar, tobacco and cigarettes, urea, fertiliser containing N-P-K,

cotton, wool

– In 2002:• Some fertilisers (ammonium, superphosphates, N-P, P-K)

• Elimination of import license, upon accession:– Durum wheat, wheat and meslin, maize, rice, edible oil

(soybean, ground-nut, palm, sunflower, rape, maize, sesame)


Import and export licenses

• Publication on a regular basis in the Official journal– By products, list of organisation responsible for authorizing

imports or exports– Procedures and criteria for obtaining import license– List of all products subject to tendering requirements– List of all goods and technologies whose imports or exports

are restricted/prohibited– And any change

• Minimum duration of import license: 6 months


Price controls• Shall be eliminated : price to be determined by

market forces• Exception

– Tobacco and pharmaceuticals– Impossible to enlarge the list, and China shall make

best efforts to reduce and eliminate these controls• Subject to Gov guidance pricing:

– Grains (durum wheat, wheat and meslin, rice, maize, soybeans)

– Crude oil (soybean, rape, mustard)– Fertiliser (urea)– Silkworm cocoons and cotton (non carded)


Agriculture• No maintain or introduce export subsidies, upon

accession

• Domestic support to farmers not exceed 8.5% of the value of the production (de minimis provision)

• To notify fiscal transfers between/among STEs in agricultural sector

• Market access :– Tariffs rate quotas– Tariffs


Tariffs rate quotasProduct Initial quota

(mt)Final quota

(mt)In-quota

tariffOut-Quota

2002Out-Quota

2003Out-Quota

2004

Wheat 7,884,000 9,636,000 1% 71% 68% 65%

Wheat flour 6% 71% 68% 65%

Wheat semolina

9% 71% 68% 65%

Maize 5,175,000 7,2000,000 1% 71% 68% 65%

Maize flour 9% 56% 48% 40%

Maize semo. 9% 71% 68% 65%

Rice 3,325,000 5,320,000 1% 71% 68% 65%

Rice flour 9% 56% 48% 40%

Soybean oil 2,118,000 3,587,100 9% 52.4% 41.6% 30.7%

Palm oil 2,100,000 3,168,000 9% 52.4% 41.6% 30.7%

Rape-seed oil 739,200 1,243,00 9% 52.4% 41.6% 30.7%

Sugar 1,680,000 1,945,000 20% - 15% 65.9% 58% 50%

Wool 253,250 287,000 1% 13.9% 13.5% 13.5%

Cotton 780,750 894,000 1% 54.4% 47.2% 40%


Decrease of tariffsProduct Initial rate Final bound

rateYear of

implementation

Pig meat 19.8% 15% 2004

Poultry meat (cuts) 16% 10% 2004

Butter 36.7% 10% 2005

Bananas 19% 10% 2004

Strawberries 27.1% 14% 2010

Instant noodles 21.7% 15% 2005

Apple juice 30% 20% 2005


Transitional product-specific safeguard mechanism

• In force during 12 years after accession• If Chinese products are increasingly imported by a

WTO member, creating a market disruption for domestic producers– Consultation with WTO– China shall remedy to the market disruption– If no agreement : WTO member may limit imports– Il the limit stay in place more than 2 years : China can

suspend application of equivalent concession– If delay would cause damage, WTO member may take a

provisional safeguard measure, no more than 200 days.


Reservation by WTO members

• Possibility to maintain quantitative restriction on Chinese imports, to be phased out, on a case by case basis.

• Argentina, EU, Hungary, Mexico, Poland, Slovak Republic, Turkey.– Mostly for footwear– Ex: Slovak import quotas on foot wear

• Each year, increase on 15 % (from 2001 to 2004)• 2005 : removal


Notification of subsidies with trade effects• Loans provides by the Agriculture Development

Bank of China– Purchase and storage of agricultural products

• Subsidies for poverty alleviation– Loans by the Agric.dvpt Bk; to poorest regions

• Funds for construction of irrigation infrastructure• Tax and tariff refund for export products:

– Tariff refund for imported contents of export products– VAT refund for exports

• Agricultural products : VAT = 10% refund = 3%• Industrial product using agricultural products as raw material :

VAT = 17% refund = 6%


What impact on Chinese agriculture


Challenges

• More than 100 million people living below the poverty line (1 US$/day)

• Vulnerability of large parts of rural economy

• Main challenge: how to increase farmers’ income ?


Policy reforms

• WTO accession is not the beginning of a reform process, but the achievement.

• Under the WTO framework: policy reforms = extension of past efforts, but acceleration

• As consequences of past policy reforms– Nominal protection rate of rice, maize and wheat

decrease;– Stable for soybeans– Decrease in grains exports, but increase for labour

intensive products (horticulture, animal production)


Policy reforms (cont’d)• Measures existing prior accession, to be

removed– VAT on imported soybeans, no on local ones– Exports subsidies for maize and cotton (mainly)

• Still existing possibilities for the use of some agricultural policies instruments:– Domestic support to farmers;– Tariffs;– STEs


Economic assessment of accession (2001 – 2007)

Farm unskilled wages - 0.7 %

Rental prices of land - 5.5 %

Non-farm unskilled wages + 1.2 %

Skilled labour wages + 0.8 %

Rental price of capital + 1.3 %

Farm household income (0% non-farm) - 1.6 %

Farm household income (30 % non-farm) - 0.8 %

Farm household income (60 % non-farm) + 0.1 %

National economic welfare (billions US$) + 9.56

Source : Anderson, Huang and Ianchovichina in China and the WTO, World Bank, 2004


Sectoral impactsOutput Employment Exports Imports

Rice - 2.1 % - 2.3 % + 6.1 % - 7.1 %

Wheat - 2.0 % - 2.3 % + 18.9 % - 10.1 %

Feed grains - 2.3 % - 2.6 % - 77.8 % - 2.4 %

Fruits & veg - 3.4 % - 3.7 % + 14.6 % - 6.3 %

Oilseeds - 7.9 % - 8.4 % + 29.8 % + 20.9 %

Sugar - 6.5 % - 7.4 % + 13.9 % + 24.1 %

Plant based fibres + 15.8 % + 16.4 % - 51.8 % + 7.7 %

Livestock & meat + 1.3 % + 1.1 % +15.5 % - 8.9 %

Dairy products - 2.0 % - 2.4 % + 13.5 % + 23.8 %

Other food - 5.9 % - 6.4 % + 11.4 % + 62.6 %

Source : Anderson, Huang and Ianchovichina in China and the WTO, World Bank, 2004


Policy implications• Farm households worse off if:

– No possibility to send family workers to jobs out off agriculture;

– Infrastructures in the region are too weak to attract new activities;

– Unability to diversify into other farm goods

• Risk of increasing poverty in hinterland provinces:– Long way from markets– Poor Infrastructures


Policy implications (cont’d)• Investments in basic education and health

– Boost farm productivity– Ability to move to other jobs

• Improvement in rural infrastructures– Better link farm – markets– Expanding new activities

• Agricultural research and development– Boost farm productivity


Policy implications (cont’d)• Improve quality and competitiveness of

agriculture– Standards– Market information systems– Accelerate innovation– Establishment of a domestic agricultural

policy conforms to WTO rules

Documents

Training session - Vietnamese agriculture and WTO - Hanoi - sept. 20051 The accession of China