The impact of China's accession to the World Trade Organization
(WTO) fell short of expectations in 2002. Its agricultural imports
failed to increase despite tariff cuts, elimination of export subsidies,
a reduced role of government-sponsored trading companies, and greater
transparency in trade-related regulations. Its exports of many agricultural
commodities increased, also contrary to expectations.
The corn market is the most prominent example of unrealized WTO
effects. After joining the WTO, China's elimination of export subsidies
for corn was expected to reduce its corn exports—among the
world's largest in recent years. Instead, China's corn exports continued
at near-record levels in 2002 (11.7 million tons) as China promoted
exports to draw down large stockpiles of grain accumulated during
the 1990s. Though China ended export subsidies for corn as part
of its WTO commitments, those subsidies were reportedly replaced
by internal transportation subsidies and tax rebates, and its exports
in 2002 were still priced well below domestic prices.
China's corn imports were negligible in 2002, despite China's agreement
to allow corn imports at a low 1-percent tariff. Potential importers
(mostly Chinese feed mills) had to apply for permission to import,
and there were several months of delays in processing applications.
Most applicants were given permission to import only a small quantity
of corn that would not fill a cargo ship. Imports were assessed
a 13-percent value-added tax in addition to the 1-percent tariff,
raising the cost of imports above the cost of Chinese corn.
China's trade performance in 2002 was not due entirely to its policy
measures. Tight world supplies helped China's corn exports. Rising
world market prices due to drought in North America reduced the
need for subsidies, making Chinese exports more competitive and
imports more costly for Chinese buyers. China's corn exports are
likely to drop if world prices decline.
China's WTO accession negotiations
were unusually lengthy and complex, as negotiators sought to close
potential loopholes. Nevertheless, China's policymakers are still
finding ways to align agricultural trade with domestic policy objectives.
China's agricultural sector has become
more market oriented and transparent in recent years, but tight
government control over foreign trade still makes it difficult to
predict global market impacts. In the long run, WTO accession will
likely provide the competitive pressures needed to integrate China's
agricultural sector with world markets, but it may be slow in coming.
