World grain trade could increase by 50% if China joins the W.T.O., analysts say

by Stormy Wylie
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WASHINGTON — World trade between China and countries that supply major grain crops could expand more than 50% by 2005 from current baseline projections, should China succeed in gaining membership in the World Trade Organization, according to analysts with the Economic Research Service of the U.S. Department of Agriculture.

In an article published in the March issue of Agricultural Outlook, E.R.S. analysts said China was forecast to import key field crops (corn, wheat, rice, soybeans and soybean products, and cotton) valued at U.S.$3,544 million in 2005. But with accession into the W.T.O., the value of China's imports of those commodities was projected to increase to U.S.$5,495 million.

China began seeking entry into the W.T.O. in the mid-1980s, but has encountered opposition from many countries (see story below).

A trade agreement signed by the U.S. and China in Beijing on Nov. 15 followed 13 years of negotiations. This agreement formed the basis of the E.R.S. analysts' projections. Under terms of the U.S.-China agreement, which will be incorporated into the final W.T.O. accession protocol, China has agreed to eliminate non-tariff barriers on agricultural imports upon its accession to the W.T.O. and implement a series of tariff cuts between 2000 and 2004. In addition, China committed to establish tariff-rate quotas (T.R.Q.'s) for wheat, rice, corn, cotton and soybean oil, with gradually increasing quota levels.

Significant cuts in tariffs will be completed by January 2004, according to the U.S.-China agreement. For agricultural products overall, tariffs will drop from an average of 22% to 17.5%.

For goods subject to a T.R.Q., a specified quantity of imports (the quota) may enter at a low tariff rate and additional imports are assessed at higher rates. China is not obligated to purchase the T.R.Q. amount, and may buy from any source. In other words, though the agreement on agriculture was concluded between the United States and China, the United States need not be the supplier of any of the products subject to T.R.Q.'s.

The value of China's wheat imports in 2005 was forecast at U.S.$309 million in the U.S.D.A. baseline. But with accession to the W.T.O., China's wheat imports were forecast at U.S.$853 million.

Although China has imported less than 2 million tonnes of wheat each year over the past three years, and the country's wheat stocks are relatively high, imports are still expected to increase under W.T.O. accession because of demand for high-protein-content wheat in urban areas and a decrease in trade barriers for the previously banned U.S. Pacific Northwest soft white wheat.

South China would be the likely destination for much of the additional imports needed to meet the demand for wheat (for noodles, cakes, biscuits and pastries), the E.R.S. said. North China should continue to be supplied primarily by domestic production, though it also relies on imported wheat for blending purposes.

Should China gain entry to the W.T.O., the world market for corn would be even greater, the report said.