- The Washington Times - Tuesday, September 12, 2000

Executive branch officials routinely exaggerate the expected payoffs from new trade agreements to win support for those agreements in Congress. The recent U.S.-China agreement setting terms for China's protocol for accession to the World Trade Organization (WTO) has been hyped accordingly. Yet in the area of agriculture, the gains from this new agreement are actually greater than U.S. officials have so far dared to claim.
Additionally, farm state legislators should be particularly sensitive to the fact that China's joining the WTO will be a pre-emptive strike benefiting American farmers. Membership in the WTO will preclude China from later raising trade barriers on agricultural products. Every other nation has raised such barriers as it has become industrialized.
Furthermore, on joining the WTO, China would undoubtedly find reason to curtail internal subsidies. Such subsidies would surely further increase China's agricultural production. China has already found such subsidization to be costly and to cause grain surpluses that are both hard to store and cope with.
The official claim, from the U.S. Department of Agriculture, is that China's participation in the WTO will produce an annual gain of $1.6 billion in new U.S. exports of grains, oilseeds and cotton by 2005. It will also lead to $350-450 million annually in additional U.S. exports of other products such as poultry, pork, beef, citrus, other fruits and vegetables, and forest and fish products.
This optimism is well-founded, since under the agreement China has agreed to allow imports of a minimum of 7.3 million tons of wheat virtually duty-free (only a nominal 1 percent tariff,) and this quantity will increase to 9.3 million tons over five years. Those tonnages represent 11 to 15 percent of the wheat crop in the United States. For soybean and soybean meal imports, China's current tariffs will be locked in at 3 percent and 5 percent respectively, and for soybean oil China will reduce and bind its current tariff from 13 percent to 9 percent and increase the quota of imports allowed under this lowered tariff from 1.7 to 3.2 million tons over the six year implementation period.
Those numbers also represent a meaningful percentage of our production. For corn, China has agreed to allow imports of 4.5 million tons (at just a 1 percent tariff) increasing to 7.2 million tons. It also promises to stop using export subsidies to dump its own surplus production (roughly 8 million tons of corn this year) onto other markets in East Asia, opening up still more trading space for highly competitive U.S. corn exporters.
These market-opening gains are impressive measured against the standard of China's current farm trade policies. Yet they are even more impressive if measured against China's likely future farm trade posture, absent any WTO disciplines. The new agreement does not simply codify future farm trade liberalizations that China might have been expected to undertake anyway. Instead, it operates pre-emptively against what might have otherwise been a damaging increase in Chinese farm sector protection.
The tendency of all nations as they industrialize is to increase policy protection in the agricultural sector.
Earlier in the 20th century, industrial development has also helped bring differing degrees of farm sector protection to most of Europe and to the United States. Continued rapid industrial development in China might thus have been expected, before long, to trigger an increase in China's farm trade protection from the current level. It is fortunate that China will now come into the WTO and bind its protection levels for agriculture before this natural, post-industrial tendency to extend lavish protection to relatively inefficient farmers has expressed itself.
This is good for U.S. agricultural exporters, but the Chinese know it is good for them as well, which is why they are doing it. The Chinese do not want to be stuck several decades from now struggling, like the Japanese and the Europeans, to escape a costly and burdensome system of subsidies to inefficient farmers. China's agricultural policies, which are not yet heavily protectionist, have nonetheless already begun to generate periodic surpluses of corn, wheat, and rice, and officials have learned these surpluses are expensive to store at home and costly to export under subsidy. China welcomes the import policy disciplines it is accepting in WTO as an incentive to avoid moving toward costly farm subsidy policies in the years ahead.
All that remains is for the U.S. Senate to approve Permanent Normal Trade Relations (PNTR) for China, so that U.S. farmers will be able to share in the gains from this new trade liberalizing agreement. Without a PNTR policy in the United States, the expanded agricultural trade benefits from China's accession to the WTO are likely to be captured more by farmers in Canada or Australia, and less by the United States.
With the U.S. farm sector currently struggling under a burden of low prices brought on in part by sluggish exports to East Asia, the China option is not one to be missed. Farm state legislators in Congress need to see these facts clearly when the time comes to vote on PNTR status for China.

Rudy Boschwitz was a United States senator from Minnesota (1978-91). Robert Paarlberg is professor of political science at Wellesley College.



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