China's Integration With Global Markets Colin Carter Executive Seminar on Agricultural Issues December 10, 2001 Sacramento
Introduction China welcomed to the WTO after 15 year wait Sunday Telegraph, Nov. 11 "China can never compete with the United States, Canada and Australia in the farm arena" South China Morning Post, Nov. 12 China's Ticket Into WTO Foreshadows Revolution Washington Post, Nov. 11
Introduction China accounts for 3% of global agric. trade-potential to play a greater role. China's agric. import tariffs (40-60%) are below those of many WTO members (esp. developing countries). China also maintains nontariff barriers that restrict imports, including tariff rate quotas, quotas, import licenses, and state trading.
WTO Entry China s entry into the WTO should facilitate the restructuring of its agric. Low farmgate prices, marketing inefficiencies & erratic gov t policy, all serve to tax agriculture. Integration between rural & urban economies is discouraged & rural product & factor markets are distorted. Barriers to inter-provincial trade remain high within China (A. Young).
Recent Studies Liu and Cheng: membership in WTO will be positive for China s agric. Colby, Price and Tuan: WTO accession will boost China s net agricultural imports. OECD: China s ag. trade liberalization may have small impacts on trade flows, unless combined with domestic policy reform.
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Arable Land (m.ha) Output per ha Value Added per worker ($ 000) Fert. Use (mt/ha) Agric. in Total Irrig. Land in total arable Tractors per 000 ag. Workers Australia 54 $376 $31 0.04 4.7 4.5 700 Canada 45 $403 n/a 0.06 2.5 1.6 1,642 China 124 $2,181 $0.3 0.28 49.8 42.4 1 France 18 $1,813 $37 0.26 3.7 10.9 1,236 India 161 $727 $0.4 0.10 60.5 36.5 6 Japan 4 $3,086 $31 0.31 4.6 59.1 637 USA 177 $853 $39 0.11 2.2 12.1 1,484
Market China s 320 m. farmers make up 50% of the national labor force but produce less than 20 % of the GDP. productivity in agric. < 1/5 th that of industry & < 1/3 rd of that in service sector (Bhattacharyya & Parker 99). Gov t. policy supports urban wages at the expense of returns to farm labor. does not move freely between rural & urban employment opportunities (Zhao; 1999).
12,000 10,000 8,000 6,000 4,000 2,000 Regional Differences in Income & Employment Yuan/Capita % 0 East East Central Central West West 70 60 50 40 30 20 10 0 Per capita GDP Agric.Share of Exit of labor from agric. has been regionalized.
CHINA S NET AGRICULTURAL EXPORTS: 1970-1999 6 4 2 Grains Horticultural Products Animal Products Other Billion U.S. $ 0-2 -4-6 -8 1970 1974 1978 1982 1986 1990 1994 1998 Source: Compiled from FAO trade data
CHINA S NET HORTICULTURAL EXPORTS: 1980-1997 billion U.S. $ 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5 Fruits & Vegetables Coffee, tea, cocoa, spices Tobacco crop Plant Fibres Crude Vegetable materials 1980 1983 1986 1989 1992 1995 Source: Compiled from FAO trade data
Ratio of Border to Farmgate Prices 215% 165% 115% 65% 15% -35% 1991 1992 1993 1994 1995 1996 1997 1998 Rice Wheat Corn Soybeans Negative Protection for most of China s agric. Cotton
Regional Specialization Indexes 1.2 1 Index 0.8 0.6 0.4 0.2 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999
Summary WTO will further lower trade barriers & force trade patterns consistent with resource endowments. China s agric. trade patterns have not changed much since 1980. Regional agric. specialization in 1999 was less than in 1981; due to domestic distortions. Further agric. policy reform in China (in response to joining WTO), will transform China's agric.
Summary In early 1990s, Ted Schultz, (Nobel Prize winner), said gains from specialization when China moves away from planning & selfsufficiency, to a country with specialized family farms, would swamp the returns that have resulted from decollectivization. If Schultz was right, it might be that the real gains from liberalization of China s agriculture have not yet been realized,