Key Priority Trade Policy Issues

China Trade Policy Issues

Details

Category: Key Priorities

Published on Friday, 03 February 2012 15:28

China’s economic growth continues to drive increased levels of middle class with projections of over 325 million by 2020. While China is a major agricultural producer and has great underlying potential for modernization/productivity increases it is constrained by intensive use of land, reliance on human labor, small farm size, lack of private ownership and access to capital.

An ongoing issue is their resolve for food self-sufficiency. However, it is clear that goal is not obtainable for all agricultural commodities and the key question is whether China will mature to the point of accepting food security through trade rather than self-sufficiency. This objective is pressured by the continuous sharp growth of hog production with the percent of hogs in commercial production facilities increasing from 35% in 2005 to 65% in 2010. The dairy sector has grown more than 10% for more than 10 years. At the same time it is clear that China corn stocks have declined sharply over the last five years resulting in high internal prices.

Potential Impact

China’s new food demand has created enormous opportunities for U.S. producers. At the end of 2010, China imported 1.5 mmt of corn and by the end of 2011 they will have purchased in excess of 2 mmt. Private and public estimates of corn imports for 2011-12 range from 2 to 10 mmt.

As this demand grows, it will change the dynamics of the US corn/DDGs complex and at the same time require a transition to resolving the food security vs. food security issue. It will also require addressing numerous trade constraints—food safety concerns; non-tariff issues (TRQs/import licenses); DDGs anti-dumping case; DDGs registration requirements and their biotechnology approval process.

For China, it poses a range of challenges related to the pace and scale of its rural development, the capacity of Chinese agriculture to absorb new technology given China’s own domestic constraints and tensions arising from China’s commitment to food security defined as something approaching self-sufficiency.

Strategy/Level of Engagement

The Council has engaged in a strategic dialogue to lay the foundation for a long-term relationship based on mutual respect and trust. Among the first tasks is to build confidence and reliability of the U.S. as a long-term supplier.

The Council is also engaged at several levels with the Chinese government on a number of key trade policy questions.  USGC sponsored a biotech conference in June 2011 jointly with the Development Research Center and the Center for Chinese Agricultural Policy. It was the first such initiative to provide an opening to create a permanent forum for the exchange of technology and ideas toward adoption of a fully functioning biotechnology regulatory system.  The objective is to address both trade and market considerations from both sides and put the US agricultural sector one step closer to addressing several longstanding and trade disruptive irritants such as the need for timely approvals, an established and reasonable low level presence for unapproved events and recognition of testing procedures to avoid unnecessary and cumbersome duplicative requirements.

The pending anti-dumping case on U.S. DDGs was filed on December 28, 2011. To date no actions have been taken and the case was extended the end of June 2012. No interim duties were enacted as is usual in these cases, in part because a strong case was made by the Council as well as support by the Chinese Feed Grain Association. 

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