Written Testimony of Patricia R. Sheikh
Deputy Administrator, International Trade Policy
Foreign Agricultural Service
US Department of Agriculture
Before the U.S. China Economic and Security Review Commission
January 18, 2002 Public Hearings on
WTO Compliance and Sectoral Issues
Mr. Chairman, members of the Commission, thank you for the opportunity to discuss
the significant impact of China’s entry into the World Trade Organization
(WTO) on U.S. agriculture and how the United States will effectively monitor
China’s WTO compliance.
On December 11, 2001, China became the 143rd member of the World Trade Organization
(WTO) marking the culmination of protracted negotiations during the past 15
years. The integration of China into the global trade community offers timely
benefits for U.S. agricultural producers, processors, and exporters. With 1.3
billion people, one-fifth of the world’s population, China’s accession
to the WTO gives U.S. agriculture access to one of the world’s largest
and fastest growing economies. New export opportunities will emerge for a broad
range of US agricultural products, including grains, meats, produce, cotton,
and processed goods.
China’s accession to the WTO dramatically cut import barriers currently
imposed on American agricultural products. When fully implemented, China’s
WTO commitments could add approximately $2 billion a year to U.S. agricultural
exports due to tariff reductions. Under the 1999 U.S.-China bilateral access
agreement, China agreed to cut tariffs by more than half on priority U.S. agricultural
products such as beef (from 40% to 12%), poultry (from 20% to 10%), cheese (from
50% to 12%), oranges (from 40% to 12%), apples (from 30% to 10%), wine (from
65% to 20%), grapes (from 40% to 13%), to name a few.
With WTO entry, China also agreed to end its system of discriminatory licensing
and import bans for bulk commodities, and to create market access opportunities
by establishing a WTO-consistent tariff-rate quota (TRQ) system. China established
larger and increasing TRQs for their state-traded commodities such as wheat,
corn, cotton, rice and soybean oil. China has also committed to low, within-quota
tariffs of 1-3 percent for imports of bulk commodities which will help American
farmers take full advantage of the TRQs. In addition, China committed to allow
a share of the TRQs for each commodity to be imported by entities other than
state-trading entities and agreed to specific rules for the administration of
these TRQs. The introduction of private trade for these commodities -- combined
with increased transparency in the process -- will ensure increased opportunities
for American agricultural exports.
China committed not to use export subsidies for agricultural products when it
joined the WTO. This commitment will level the playing field in third-country
markets for U.S. exports of corn, rice, and cotton -- which in the past have
been displaced by unfairly traded Chinese exports.
On domestic support, China committed to cap any trade-distorting domestic support
at 8.5 percent of its total value of agricultural production. China’s subsidies
to its agricultural production are currently very low. In addition, China also
committed to provide greater transparency to make its domestic support measures
more predictable.
China has committed to fully abide by the terms of the WTO Agreement on Sanitary
and Phytosanitary (SPS) Measures, which requires that all animal, plant, and
human health import requirements be based on sound science -- not political
agendas or protectionist concerns. Additionally, China and the United States
agreed bilaterally on the terms for the removal of scientifically unjustified
restrictions on imports of U.S. wheat and other grains, citrus, and meat.
The China WTO accession agreement explicitly permits the U.S. to continue to
use its non-market anti-dumping methodology for 15 years after China’s
accession to the WTO. China also has committed to a strong product-specific
safeguard that allows the United States for 12 years after accession to restrain
increasing imports from China that cause or threaten market disruption. After
that, current U.S. safeguard provisions -- Section 201 -- will remain available
to address increasing imports.
American farmers will benefits from expanded trading rights. Currently, only
companies that receive specific authorization from the Chinese government are
allowed to import into China. Under the agreement, China has committed to allow
any entity to import most products into any part of the country within three
years of accession. A select list of products will be partially exempt from
this rule and some trade will be channeled through China’s state-trading
enterprises (including wheat, corn, rice, and cotton; state trading will be
phased out for soybean oil). However, specific commitments to end monopoly import
status have also been established. Additionally, China has committed to liberalize
distribution services for all agricultural products, except tobacco, allowing
U.S. companies to distribute and market their products in China.
In short, American farmers will benefit from dramatically expanded market access
opportunities. American farmers will realize enormous benefits in virtually
every agricultural sector, including:
• Grains. China’s offer for corn, wheat, and rice will lock in important
and long-term market access opportunities for American farmers. China has also
agreed to remove its import ban on wheat and other grains from the Pacific Northwest.
• Oilseeds. Under the WTO Agreement, China has bound tariffs at a low
rate for soybeans (3%) and soybean meal (5%), and to eliminate quota limits,
which will significantly increase future opportunities for U.S. producers. Export
prospects for soybean oil are also bright, as China phases out quantitative
restrictions and liberalizes trade completely by 2006.
• Pork. China is the world’s largest consumer of pork, but import
barriers have effectively denied access to American pork products. Under the
Agreement, China will reduce its tariffs on frozen pork and offal from 20% to
12% by 2004. This reduction in tariffs, along with China’s agreement to
eliminate unscientific barriers, will result in substantial marketing opportunities
for high-quality and competitively priced U.S. pork.
• Beef. By 2004, China will reduce its tariffs from 45% to 12% on frozen
beef, and from 45% to 25% on fresh/chilled beef. While China currently imports
a small quantity of beef, income growth and increased consumption among the
urban populations should significantly increase demand for U.S. beef.
• Poultry. China is already the second-leading market for U.S. poultry
exports. Under the Agreement, China will reduce tariffs from 20% to 10% -- which
should create a significant, immediate impact on U.S. exports.
• Cotton. China is the world’s largest producer and consumer of cotton,
accounting for 20-25% percent of the world’s total in both categories.
Under the Agreement, China will establish a large, low-duty TRQ for cotton with
a substantial share reserved for private importers, which should lead to expanded
U.S. cotton sales.
• Fruits. China will cut tariffs on a number of fruits and fruit products
exported by the United States, including citrus, apples, and grapes, and will
be obliged to remove unjustified import bans. While China is a major producer
of citrus and other fruits, U.S. producers will benefit from access to major
markets that are not adequately served by China's producers. China also made
a bilateral commitment to lift its ban on imports of citrus fruit from California,
Arizona, Texas, and Florida.
• Others. Agricultural commodities as diverse as wine, solid wood products,
fishery products, tree nuts (including almonds), dairy items (especially cheese),
snack foods, and other consumer-ready items, can all expect to benefit from
China’s WTO accession.
With China’s membership in the WTO, under the protocol of accession we
helped to negotiate, China agreed to undertake numerous trade-liberalizing commitments
which will improve market access for U.S. agriculture. We recognize that WTO
implementation will present a major challenge, both for China and its trading
partners. China will need to revamp its system, to rewrite and amend thousands
of laws, rules regulations at the central government and provincial levels.
This promises to be a long process given the complexity of the Chinese economy
and import system.
With China, what seems to be the end of negotiations is often just the beginning.
The effort to effectively monitor and enforce China’s WTO commitments is
taken seriously by the
U.S. Department of Agriculture (USDA). To ensure that China meets its new obligations,
USDA is in the process of establishing a permanent "China Task Force"
to monitor China’s compliance with its WTO commitments. The team will draw
from expertise across the Department. Futhermore, we continue to work closely
with our overseas posts and industry groups. We are currently planning consultations
with China on their new biotechnology regulations to ensure that the new regulations
do not stop trade. USDA considers this a high priority, given the importance
of the Chinese market to US agricultural producers.