Summary
This paper investigates the likely impacts of China’s entry into WTO on the domestic
husbandry and the measures to deal with the impacts. The main contents concerning husbandry of
the agreements that China has signed with major members of WTO are discussed with the current
situation of China’S husbandry. The impacts on meat production (pig, beef, sheep and goat), the
main body of China 抯 husbandry, will be beneficial because of lower cost and lower domestic
price. The importation has had a great negative effect on China 抯 table hen production. With the
entry into WTO, the negative effect on table hen breeding will be even larger. The import of dairy
products will continue to increase rapidly with the entry into WTO Fodder trade will be
transferred from export to import in the next few years. The regional distribution of domestic
husbandry will also be effected. The production of both husbandry and fodder in west and central
China will be negatively effected, especially in the short run Some measures for dealing with the
impacts, such as the adjustment of variety structure, quality management, system reform are
discussed
Abstract
Impacts of China’s Entry into WTO on the Domestic
Husbandry and Some Countermeasures
CHENG YONGZHENG
Academy of Agricultural Sciences, Institute of Agricultural and Economic Information.---450002
No.1 Nongye Road, Zhengzhou, P.R.China.
Up to June 2000, China has signed agreements on China 抯 entry into WTO with US, EU
and most of other major members of WTO. It is predictable that China will entry into WTO in the
next year. This paper investigates the likely impacts of China’s entry into WTO on the domestic
husbandry and the measures to deal with the impacts. Contents of the agreements that China has
signed with major members of WTO mainly include the following 4 aspects.
1 Market accession: Tariff will be decreased and importation quota will be increased. Non-
tariff trade measures will be transferred into tariff measures or be deleted.
2 Domestic support and export subsidiary: Domestic support will be decreased. Export
subsidiary will be deleted..
3 Trade permission and retail: The monopoly of import and export by state-owned companies
will be broken, More companies including private companies will permit to participate in import
and export. Foreign companies will be permitted to retail the imported commodities in
China. .
4 scientific and technical cooperation and other aspects.
Impacts on domestic husbandry.
1.Impacts on meat production (pig, beef, sheep and goats). Meat production is the main body
of China’s husbandry. The comparative advantages of China’s meat production exist in both cost
and price aspects. It is estimated that China’s meat export will increase with the entry into WTO.
Many people believe that the entry will be beneficial to China’s husbandry according the possible
increase of meat export..
2.Impacts on the production of poultry and eggs. The disadvantage of table hen production is
obvious. The cost of table hen per kilogram in China is about 150% of that in Europe community
or US. The table hen importation has reached a surprising amount, which was 17% of the total
table hen production in China in 1997, and the importation has had a great negative effect on
China’s table hen production. With the entry into WTO, the negative effect will be even larger.
China is one of the main egg export countries. 80% of China’s egg exportation is fresh eggs and is
exported to Hong kong and other Southeast Asia. The major competitor for China on egg
exportation is US. Considering the much low price of China’s eggs compared with that of US,
China’s egg exportation will not be effected greatly with the entry into WTO, on the other hand,
the entry will offer a good opportunity for China to increase the exportation of eggs and egg
processing products if the egg quality and egg processing technology are improved.
3.Impacts on dairy products. Dairy industry is a field that will certainly be negatively effected
in short run for three factors: lower productivity per head, the higher domestic price, and the
decrease of tariff. The annual import has reached 100000 ton in the last two years. It is predictable
that the import of dairy products will continue to increase rapidly with the entry into WTO.
4.Impacts on fodders: The domestic price per kilogram of corn in China has been higher than
that on international market and cost per kilogram of corn has also been higher than that of major
corn exportation countries in the last few years. China is transferring from a corn exportation
country to a corn importation country. It is estimated that China’s corn importation will reach 20-
40 million ton in the next ten years.
5.Impacts on the regional distribution of domestic husbandry. The regional distribution of
domestic husbandry will also be effected. The southeast coastal areas, which are the most
developed areas, will get a good opportunity to increase both import and export. The production
of both husbandry and fodder in the west and central China, which is still dominated by
agriculture, will be negatively effected, especially in short run.
Measures
Impacts of the entry into WTO on domestic husbandry are great. Various measures should be
applied to promote domestic husbandry, which is still very backward compared with that in
developed countries, and the following measures should be given priority.
1.Adjustment of the variety structure. The comparative advantages and disadvantages should
be reconsidered for all province and relevant adjustment of the variety structure should be
implemented as early as possible. .
2.Quality management. Quality management should be improved, and perhaps this is the
most important measure to increase import and to stable domestic market..
3.System reform. The fields of production, processing, domestic trade and foreign trade are
still separated. It is difficult for peasants to get more information on international market. All the
fields should be combined systematically to increase China’s competitive power on international
market.
Impacts of China’s Entry into WTO on the Domestic
Husbandry and Some Countermeasures
CHENG YONGZHENG
Academy of Agricultural Sciences, Institute of Agricultural and Economic Information.---450002
No.1 Nongye Road, Zhengzhou, P.R.China.
Background
Up to June 2000, China has signed agreements on China’s entry into WTO with US, EU and
most of other major members of WTO. It is predictable that China will entry into WTO in the next
year.
When China began to reform its agriculture in 1978,China’s animal production was still
mainly taken by individual households and regarded as sideline by peasants. The professional
animal farms and professional animal-breeding households have developed rapidly in the last 20
years, but most than half of the animal breeding is still the sideline of non-professional households
whose technical level and management level are very low. Compared with those of the animal
farm in developed countries, the technical level and management level of the professional animal
farms and professional animal-breeding households are also lower. So China’s animal husbandry
will certainly be affected by the entry into WTO
This paper investigates the likely impacts of China’s entry into WTO on the domestic
husbandry and the measures to deal with the impacts
I. Contents of the Agreements
Contents of the agreements that China has signed with major members of WTO mainly
include the following 4 aspects.
1 Market accession:
By joining the WTO, China is committing to establish a "tariff-only" import regime; all non-
tariff barriers will be eliminated. Any other measure, such as inspection, testing, and domestic
taxes must be applied in a manner that is consistent with WTO rules requiring a transparent and
non-discriminatory system and all health measures must be based on sound science. The
tariff on agricultural products will decline while the average duty on agricultural products of U.S.
priority interest will fall more. China’s tariff-rate quota administration concentrated on crop
produces, including wheat, corn, rice, cotton, and soybean oil, especially wheat. There is little
special tariff-quota administration for animal produces.
Tariff concessions on some key animal products that China will phase in by 2004 include the
following:
Current Tariff (%) Tariff in 2004 (%)
Meats
Frozen beef cuts 45 12
Frozen beef tongue and offal 20 12
Frozen pork cuts and offal 20 12
Frozen chicken and turkey parts 20 10
Dairy
Fresh cheese, grated, powdered
Cheese, Processed cheese 50 12
Yogurt 50 10
Lactose 35 10
Ice cream 45 19
Other food preparations 25 1
2.Trading Rights and Distribution
China has confirmed the application of WTO rules to state-owned enterprises and extended
those disciplines to state-invested enterprises, e.g., companies in which the government has an
equity interest. Under these commitments, China’s state-owned and state-invested
enterprises are required to buy and sell based on commercial considerations, such as quality and
price. Purchases and sales of goods and services by state-owned enterprises, for
commercial resale, or for use in the production of goods for commercial sale are not
considered to be government procurement and are subject to WTO rules. Application
of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) to
state-owned enterprises has been clarified. The monopoly of import and export by state-owned
companies will be broken, More companies including private companies will permit to participate
in import and export.
Currently, foreign companies’ ability to do business in China is strictly limited because the
right to engage in trade (importing and exporting) is restricted to a small number of companies
that receive specific authorization or who import goods to be used in production. China has agreed
that any entity will be able to import most products, including meat and meat products, dairy
products into any part of China. This commitment is phased in over the three-year period with all
entities being permitted to import and export at the end of the period. China -- which generally
prohibits companies from distributing imported products or providing related distribution
services -- will permit foreign enterprises to engage in the full range of distribution services.
These rights will be phased in over a three-year period for almost all products.
3.Export Subsidies and Domestic Support
China has committed not to use export subsidies for agricultural products when it joins the
WTO. China committed to cap and reduce trade-distorting domestic subsidies. The specific level
will be determined through multilateral negotiations in Geneva on the protocol and working party
report. China also committed to provide greater transparency to make its domestic support
measures more predictable.
4.Sanitary and Phytosanitary Measures
China has committed to fully abide by the terms of the WTO Agreement on Sanitary and
Phytosanitary Measures, which requires that all animal, plant, and human health import
requirements be based on sound science, not political agendas or protectionist concerns.
5. Other aspects. Including anti-dumping, safeguards, scientific and technical cooperation
and other aspects.
II.Comparative advantages and disadvantages of China’s animal husbandry
Under such liberalized international trade environment, the comparative advantages and
disadvantages of China’s animal husbandry should be systematically analyzed both in long run
and short run. This paper mainly concentrated on the following three aspects
1. Price and costs
Compared with developed countries, the price and costs of pork, beef and mutton are lower.
The price of pork, beef and mutton were lower by about 50%, 80% and 50% in the first half of
1999.the cost of pork per kilogram in China 1n 1998 was 7.05 Yuan RMB, while the costs in
USA and Japan were 7.17 Yuan RMB and 20.49YUAN RMB. The cost of beef and mutton were
even lower in China. So China has the advantages to export pork, beef and mutton on the short
run. With the low cost of labor in China and possible price decrease of fodder, such as corn, with
the entry into WTO, it is believable that China also has the advantages to export pork, beef and
mutton on the long run on the aspects of price and cost.
The prices and costs of chicken and turkey and dairy products and wool in China have been
higher than those in most developed countries. The cost of table hen per kilogram in China is
about 150% of that in Europe community or US. The disadvantage is obvious.
China is one of the main egg export countries. 80% of China’s egg exportation is fresh eggs
and is exported to Hong Kong and other Southeast Asia. The major competitor for China on egg
exportation is USA. The price of China’s eggs is much lower than that of USA, China’s egg
exportation will not be effected negatively on price and cost aspects
The cost and price of China’s corn increased rapidly in the last 10 years and have surpassed
those in major corn production countries. The cost of China's corn per kilogram have been 150-
200% of the cost in major corn production countries, and price have been higher that the price on
the international market by 20-50% China is transferring from corn export country into import
country，
2.Quality
Because of the rapid increase of population, the rapid improvement of living condition and
the shortage of most agricultural produces in China before 1997, China paid most attention on the
quantities of most animal products. The quality of China’s animal produces is lower than that of
developed countries.
At first, China’s capacity of processing is still low, the high processing cost and low
processing quality limit the exportation of China’s animal products. Up to now, most of the
exportation of China’s animal produces are living or fresh products.
Sanitary quality is another crucial aspect that limits China’s exportation. China needs to
improve its sanitary standards to meet the demand of most import countries. Actually sanitary
quality has also been an important obstacle for China to increase exportation of many animal
products.
Besides, the varieties of animal also need to improve further to meet the demand on
international market, such as the quality of pork whose rate of lean meat need to increase
continuously.
3.system and organization
On the aspect of system and organization of production and commence, the advantages of
China is very obvious. China is transferring from planning economy into market economy; the
construction of systems and organizations, which are required by modern market economy, is still
in the very beginning phase.
For the production organization, the scale of China’s animal breeding households and farms
are still very small because of their short history, and most of them lack of the experience of
market management. Their technical level is also much lower. Actually the competition between
the developed countries and China is inherently unequal.
The market for most animal products have opened since the first half of 1980’,but the trade
organization developed rather slow, marketing cooperation have not emerged, large wholesale
companies and retail companies also developed slowly. State import and export companies rarely
consider the benefits of animal breeding households and farms. So the producers, domestic traders,
importers and exporters of animal products in China have not combined together as that in the
developed countries. Producers are difficult to get the information on the international market,
even the information on the domestic market in many cases.
The disadvantages on system and organization will greatly affect China’s animal husbandry,
especially in the short run.
III. Impacts on domestic animal husbandry
Based on the agreements and the advantages and disadvantages discussed above, it is
believable that the entry into WTO will drastically affect China’s animal husbandry in the short
run. The effects on concrete animal products are discussed as the following:
1.Impacts on meat production (including pork, beef, mutton).
Meat production is the main body of China’s animal husbandry. The comparative advantages
of China’s meat production exist in both cost and price aspects. It is estimated that China’s meat
export will increase with the entry into WTO. Many people believe that the entry will be
beneficial to China’s husbandry according the possible increase of meat export. However, the
increase will not be so great because of the processing quality and sanitary quality of China’s meat,
on the other hand, the import of some meats, such as the pork from USA, will increase because of
the decrease of tariff and better quality which meet the demands of some rich population in the big
cities.
2.Impacts on the production of poultry and eggs.
The chicken and turkey parts importation has already reached a surprising amount, which
was 17% of the total table hen production in China in 1997, and the importation has had a great
negative effect on China’s table hen production in 1990’, With the entry into WTO, the negative
effect will be even larger.
Considering the much low price of China’s eggs compared with that of US, China’s egg
exportation will not be effected greatly with the entry into WTO, on the other hand, the entry will
offer a good opportunity for China to increase the exportation of eggs and egg processing products
if the egg quality and egg processing technology are improved.
3.Impacts on dairy products.
Dairy industry is a field that will certainly be negatively affected in short run for three factors:
lower productivity per head, the higher domestic price, and the decrease of tariff. The annual
import has reached 100000 ton in the last two years. It is predictable that the import of dairy
products will continue to increase rapidly with the entry into WTO.
4.Impacts on fodders:
The domestic price per kilogram of corn in China has been higher than that on international
market and cost per kilogram of corn has also been higher than that of major corn exportation
countries in the last few years. China is transferring from a corn exportation country to a corn
importation country. It is estimated that China’s corn importation will reach 20-40 million ton in
the next ten years.
5.Impacts on the regional distribution of domestic husbandry.
The regional distribution of domestic husbandry will also be effected. The southeast coastal
areas, which are the most developed areas, will get a good opportunity to increase both import and
export. The production of both husbandry and fodder in the west and central China, which is still
dominated by agriculture, will be negatively effected, especially in short run.
Even though the entry into WTO cannot bring with much benefits in short run, it is
believable that it is beneficial to China’s animal husbandry. Basically, China lacks of farm fields
and is rich in labor, so it is better for China to develop animal husbandry than to develop crops
planting. With the rapid development of processing capacity and the improvement of the quality,
the advantages of low cost and low domestic price will promote export of China’s animal products
under liberalized trade environment. Besides, the entry into WTO will also promote the reform
of China’s animal husbandry to be compatible with the market economy, thus enhancing the
production of animal products and sharpening the competitive edge of China's animal products in
the international market.
.IV. Measures
Impacts of the entry into WTO on domestic husbandry are great. Various measures should be
applied to promote domestic husbandry, which is still very backward compared with that in
developed countries, and the following measures should be given priority.
1.structure adjustment.
The comparative advantages and disadvantages should be reconsidered for all province and
relevant structure adjustment should be implemented as early as possible. The eastern area and the
suburbs of large cities should stress the intensive processing of animal products to stimulate
animal breeding and accelerate the modernization of the sector. The central and western regions
should make breakthroughs in breeding methods, strive to lower production costs, improve quality
and enhance production efficiency and economic returns. Pastoral areas should intensify the
amelioration of pastures, enhance the per-unit animal accommodation level, strive to recover
grassland vegetation and give priority to the development of dairy products and wool. The choice
of animal varieties should be reconsidered according the situation of different areas.
2.Quality management.
Quality management should be improved, and perhaps this is the most important measure to
increase import and to stable domestic market.
3.System reform.
The fields of production, processing, domestic trade and foreign trade are still separated. It is
difficult for peasants to get more information on international market. All the fields should be
combined systematically to increase China’s competitive power on international market.
References:
1. Lin Yifu, Hu shudong
June 6,2000
2.
Office of the U.S. Trade Representative
3.
China Team for Survey of Costs of Agricultural Produces. 1999
4.
Economic Research Service／USDA．August 1999