Tariffs to be cut as trade pact sows seeds of change
The mainland will make greater reductions in tariffs on agricultural items of particular interest to the United States and establish tariff rate quotas for bulk commodities under an agreement that paved the way for the mainland's accession to the World Trade Organisation.
US Trade Representative Charlene Barshefsky said the mainland agreed to cut tariffs on agricultural products to between 14.5 per cent and 15 per cent.
The mainland also will set large and increasing tariff rate quotas for wheat, corn, rice and cotton with a substantial share reserved for private trade. State trading in soy oil will also be phased out.
Under the tariff rate quotas system, imports up to a quota level are charged minimum tariff, usually 1 per cent to 3 per cent, and imports above that level a high tariff.
It is anticipated the system could encourage state trading enterprises to buy bulk commodities at world market rates.
Analyst at China International Capital Corp (CICC) Shawn Xu Xiaonian estimated the value of the country's agricultural imports would be double that of last year under the Sino-US Agricultural Agreements signed in April.
According to the bilateral farm-trade agreement, the mainland would eliminate all quantitative restrictions.
However he cautioned that the tariff reduction should only have a limited impact on imports of tariff-insensitive agricultural products and large tariff reductions will occur mostly for items such as meat and wine.
Traders in corn and wheat said the mainland would not be a big buyer of US grain, as domestic prices for corn are only slightly higher than US produce. The mainland is also largely self-sufficient in wheat.
In the mainland, concern has been raised about the possible impact of foreign competition on the sector's largely scattered and small-scale operations.
National security was also at stake as 900 million people, or three-quarters of the population, live in the countryside. However Mr Xu said the country's concessions in agriculture would not put national security at risk.
He said that, even if the value of grain imports increased threefold after the mainland's entry into the WTO, the country's grain self-sufficiency ratio would drop only from 97 per cent to 92 per cent.
It is still not clear whether the agreement would allow the mainland to continue subsidies for corn exports, which challenge US corn sales for Asian markets, but Mr Xu said the mainland could never compete with the US, Canada and Australia in the farming sector given the distribution of natural resources.