The U.S. Trade Representative’s Office (USTR) has issued 12 annual reports as required by the U.S.-China Relations Act of 2000 on China’s compliance with its WTO commitments on trade policies. China’s ascension to the WTO in December 2001 occurred during a period of market reforms consistent with China being a WTO member. In 2003, China began to revert to its previous policies of government intervention and control. Over the past year, China’s new leaders have given positive signs of re-energizing earlier economic reforms.
According to the USTR 2013 Report to Congress On China’s WTO Compliance, the Third Plenum of the 18th Central Committee of the Chinese Communist Party in November 2013 endorsed a number of far-reaching economic reform pronouncements, including that the market should be ”decisive” and “dominant.” Although these words are yet to be translated into changes in China’s trade policies, the USTR is encouraged by the potential change in direction. That is good new for U.S. agriculture because it would provide an increased level of certainty in China’s agricultural trade policies.
The 12 years of U.S. engagement with China on WTO compliance for agricultural products can be summed up in one word – transparency. The authors of the USTR report explained, “… China remains among the least transparent and predictable of the world’s major markets for agricultural products, largely because of selective intervention in the market by China’s regulatory authorities.”
Lowering tariffs on agricultural products from an average of 37 percent in1997 to 14 percent in 2006 was the easiest part of transparency. Part of the opening of existing market was the creation of tariff rate quotas (TRQ) for the major bulk commodities to provide increase import competition. Twelve years later transparency of the TRQs remains an issue. U.S. exports to China of soybeans and cotton, and more recently corn, have increased dramatically because markets have grown, not because the TRQs have provided increased shares of existing markets.
The current news headlines about U.S. shipments of corn and DDGS being rejected because of the finding of unapproved biotech traits could have been written in earlier years for soybeans, cotton or canola. The twelve year record is littered with efforts by U.S. officials to work around some well known biotechnology problems or ones that suddenly developed due to a lack of transparency. Many of the issues are related to China’s requirement that a product to be approved in the country of origin before it can be submitted in China for approval and that the National Biosafety Committee reviews product applications at only three meetings per year. A lack of clarity on products with multiple traits is an additional concern, as are duplicative and unprecedented testing requirements. Zero tolerance for low-level presence of an unapproved traits and a difficult process for extension of existing safety certificates add to the complexities.
Problems also exist with sanitary and phytosanitary (SPS) issues with beef, pork and poultry meat, but that is not unique to U.S.-China trade relations. The U.S. has disagreements with almost every country that imports meat products from the U.S. The USTR summarized the issues, “China’s regulatory authorities continue to impose SPS measures in a non-transparent manner and without clear scientific bases, including BSE-related bans on U.S. beef and beef products, pathogen standards and residue standards for raw meat and poultry products, and Avian Influenza bans on poultry. Meanwhile, China has made progress but still does not appear to have notified all proposed SPS measures as required by WTO rules.” Beef, pork and poultry issues are priorities for the USTR in 2014.
Beef may be the simplest issue. China, like many other countries, banned imports of U.S. cattle, beef and processed beef products in response to a case of BSE discovered in the U.S. in December 2003. The U.S. has met regularly since then with Chinese official providing information about BSE and U.S. status as determined by the World Organization for Animal Health (OIE). Despite these efforts, China has not opened markets. At last month’s meeting of the Joint Commission on Commerce and Trade, the two sides again set a new target of July 2014 for resumption of market access.
In 2004, China banned all poultry from the U.S. in response to cases of low pathogenic Avian Influenza (AI). After the U.S. provided more information, China dropped the national ban and went with state bans. China does not follow the OIE ruling on AI that products heat-treated to inactivate the virus should not be banned from imports. China continues to impose state imports bans.
In 2009, China imposed import bans on U.S. pork and live swine because of concern about the transmission of the H1N1 influenza A virus. The OIE and others have stressed that the H1N1 influenza A virus is not transmitted by food products and import bans are inconsistent with OIE standards. In 2010 the two countries agreed on export certificate language referencing the H1N1 influenza A virus, even though the U.S. believes that H1N1 references in an export certificate are inappropriate.
Market entry requirements for processed foods and horticultural products continue to be burdensome. Despite the rapid growth in some U.S. bulk agricultural exports to China, exports of consumer-oriented agricultural products were only $2.6 billion in 2012, about 10 percent of exports, but did increase 19 percent during the first ten months of 2013.
Despite all these challenges, China is among the largest markets for U.S. agricultural products at over $25 billion in 2012. How fast the market grows is largely up to the Chinese regulators. The report notes, “China’s WTO transparency commitments in many ways required a profound historical shift in Chinese policies, and China has made important strides to improve transparency across a wide range of national and provincial authorities following its accession to the WTO. However, China still has more work to do if it is to fully implement some of its commitments.”
U.S. agriculture representatives and government officials need to continue to advocate for more transparency so that U.S. producers and Chinese consumers can continue to benefit from increased trade. This ‘profound historical shift in Chinese policies’ will require more than twelve years to complete.