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CHINA’S IMPLEMENTATION OF ITS WTO COMMITMENTS IN THE AREAS OF AGRICULTURE AND FOOD

CHINA’S IMPLEMENTATION OF ITS WTO COMMITMENTS IN THE AREAS OF AGRICULTURE AND FOOD. Ruth Jin (This is part of my S.J.D research in the University of Tokyo). INTRODUCTION: WTO AGREEMENT ON AGRICULTURAL TRADE. Rules and Commitments: I. Market Access II. Domestic Support

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CHINA’S IMPLEMENTATION OF ITS WTO COMMITMENTS IN THE AREAS OF AGRICULTURE AND FOOD

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  1. CHINA’S IMPLEMENTATION OF ITS WTO COMMITMENTS IN THE AREAS OF AGRICULTURE AND FOOD Ruth Jin (This is part of my S.J.D research in the University of Tokyo)

  2. INTRODUCTION: WTO AGREEMENT ON AGRICULTURAL TRADE Rules and Commitments: I. Market Access II. Domestic Support III. Export Competition

  3. I. Market Access Three Parts: • Tariff: Tariffication of all non-tariff measures; mirrored in the GATT Schedule • Tariff-Rate Quota • Non Tariff Measures

  4. a. Developed Countries: (i)Average cut of all agricultural products over 6-year period (1995-2000): -36% (ii) Minimum cut per product: -15% b. Developing Countries: (i)Average cut of all agricultural products over 10-year period (1995-2004): -24% (ii) minimum cut per product: -10% c. China: see the schedules – omitted from the presentation. (Source: WTO, http:// www.wto.org) I.Market Access -Tariff Concessions

  5. Market Access Tariff-Rate Quota Commitments (TRQ) - • In General: * Lower tariff rate for specified quantities, higher rates for quantities that exceed the quota. * To be expanded to 5% of domestic consumption (it was 3% in 1995) on a most-favored-nation basis in the year of 2000 (developed countries) or 2004 (developing countries). (Source: WTO, http:// www.wto.org)

  6. Market AccessTariff-Rate Quota Commitments (TRQ) - China • Uses a TRQ system and state trading for certain sensitive commodities (wheat, corn, rice, cotton, soybean oil). • If TRQs are not utilized by the quota-holders, they are redistributed to other end uses who have an interest in importing. • A specific share of the TRQ is reserved for importation through state trading enterprises (e.g., COFCO, Chinatex); A specific share is reserved for importation by non-state trading entities. • If a TRQ share reserved for a state trade is not contracted for by October for any given year, it will be reallocated to non-state trading entities. (Source: China Gateway, http:// www.mac. doc.gov)

  7. I. Market AccessTariff-Rate Quota Commitments (TRQ) - China • China’s WTO Commitment: Fix quota allocation for designated agricultural products – Implemented. • Example: Cotton * Initial TRQ: 743,000 metric ton (1% in-quota duty; 76% out-quota duty ) * 2004 TRQ: 894.000 metric ton (1% in-quota duty; 40% out-quota duty ) * 33% of TRQ: reserved for state trading enterprises * 67% of TRQ: private share (non-state trading enterprises) • Example: Wheat * Initial TRQ: 7,300,000 metric ton (76% out-quota duty ) * 2004 TRQ: 9, 636.000 metric ton (65% out-quota duty ) * 90% of TRQ: reserved for state trading enterprises * 10% of TRQ: private share (non-state trading enterprises • Issues: Any allocation of the STE portion to the end users? Actual dates and amounts transparent? (Source: China Gateway, http:// www.mac. doc.gov)

  8. I. Market AccessNon-Tariff Measures - In General • Art. 4.2 of the Agreement on Agriculture prohibits the uses of agriculture-specific non-tariff measures. • Examples: Quantitative import restrictions, variable import levies, minimum import prices, discretional import licensing procedure, voluntary export restraint agreements, non-tariff measures maintained through state-trading enterprises, etc. • Exceptions: non-tariff import restrictions consistent with provisions of the GATT and other WTO agreements including Art. XII and Art. XVIII of GATT (balance of payment), Art. XX of GATT (general exceptions), the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Technical Barriers to Trade, etc. (Source: WTO, http:// www.wto.org)

  9. I. Market AccessNon-Tariff Measures - China a. Trading Rights b. Distribution c. Transparency: (i) Laws, regulations, administrative guidance (ii) Judicial and administrative tribunals and procedures d. Standards and Testing

  10. I. Market AccessNon-Tariff Measures - China a. Trading Rights • Before Accession: The right to engage in trade (importing and exporting) was restricted to companies who (a) received specific authorization or (b) imported goods to be used in production. • China’s Commitment: Lift the restrictions and allow all entities, including foreign-invested enterprises (FIEs) to obtain full trading rights for almost all products over a three-year phase-in period. • Implementation Status: Implemented – only need to register • Relevant law: i. Foreign Trade Law of People’s Republic of China ii. Rules on Registration for Trading Rights (Sources: Ministry of Commerce, http://www.mofcom.gov.cn; China Gateway, http:// www.mac. doc.gov; US-China Business Council, http://www.uschina.org)

  11. I. Market AccessNon-Tariff Measures - China b. Distribution Rights: • Before Accession: - FIEs could only distribute and provide after-sales services for products they manufactured in China; - Only companies with specific distribution license could distribute imported goods or goods manufactured by other companies; - Foreign service suppliers could provide retail services (except for tobacco) through joint ventures, subject to geographic restrictions - National treatment restrictions on Franchising. (Sources: Ministry of Commerce, http://www.mofcom.gov.cn; China Gateway, http:// www.mac. doc.gov; US-China Business Council, http://www.uschina.org)

  12. I. Market AccessNon-Tariff Measures - China b. Distribution Rights: • China’s Commitments and Implementations: (i) Allow Franchising: Implemented. FIEs can expand there scope of business to include franchising. - Relevant law: Administrative Rules on Commercial Franchising (ii) Allow Direct Sale: Implementation delayed. Relevant regulation is on the process of drafting and discussion. (iii) Allow wholly foreign-owned enterprises in wholesale, retail, and commission agents’ service. Implemented. • Relevant law: Measures for the Administration of Foreign Investment in the Commercial Sector (Sources: Ministry of Commerce, http://www.mofcom.gov.cn; China Gateway, http:// www.mac. doc.gov; US-China Business Council, http://www.uschina.org)

  13. I. Market AccessNon-Tariff Measures - China c. Transparency (i) Laws, regulations, administrative guidance: The Chinese Government agreed to publish a regular and prompt basis all laws, regulations, rules, decrees, administrative guidance and policies, etc. (ii)Judicial and administrative tribunals and procedures: The Chinese Government agreed to make them transparent and to maintain prompt review process, etc.

  14. I. Market AccessNon-Tariff Measures - China Transparency: The Structure and System * Constitution * Legislative: National People’s Congress (Parliament) * Executive: - Central Government - President of the People’s Republic of China - Ministries of the State Council * MOFCOM (Ministry of Commerce) * SFDA (State Food and Drug Administration) * Ministry of Agriculture * NEPA (National Environmental Protection Agency) * SAFE (State Administration of Foreign Exchange) - Local Government * Judiciary

  15. I. Market AccessNon-Tariff Measures - China * To establish foreign invested food and agriculture related companies: Administrative Registrations, Permits and Licenses * MOFCOM (Ministry of Commerce) * SFDA (State Food and Drug Administration) * Ministry of Agriculture * NEPA (National Environmental Protection Agency) * SAFE (State Administration of Foreign Exchange) * The Ministry of Land and Resource * AQSIQ (General Administration of Quality Supervision, Inspection and Quarantine), etc. * These reflect government’s intervention to the market, but transparent? Yes * Application process listed online * Applicable laws listed online (with full contents) * Can apply online in some ministries * Take short time to get the permits (usually 5 days in Ministry of Agriculture).

  16. I. Market AccessNon-Tariff Measures - China Judicial and administrative tribunals and procedures • China made commitments in this area meanly to the U.S. under Market Access Memorandum of Understanding between the U.S. and China. • No specific timeline for implementation. • Brief Introduction of Court system – Omitted from the presentation • CIETAC (China International Economic and Trade Arbitration Commission)

  17. I. Market AccessNon-Tariff Measures - China d. Standards and Testing • Commitment: All sanitary and Phytosanitary (“SPS”) standards and testing requirements must be based on sound science. • Plant products: remove any scientifically unjustifiable Phytosanitary restriction on citrus fruits, stone fruit, apples, grapes, wheat and tobacco (China-US). • Animal breeding stock: import of U.S. animal genetic materials (live animals, bovine semen and embryos) – veterinary protocol. • Wood products: policies related to conservation apply only to domestic wood products not to imported wood products. • Bio-safety (GMO products): Regulations on management and labeling of GMOs • Food safety: (next slide) (Sources: Ministry of Commerce, http://www.mofcom.gov.cn; China Gateway, http:// www.mac. doc.gov; US-China Business Council, http://www.uschina.org)

  18. I. Market AccessNon-Tariff Measures - China Food safety: Food safety licensing system being set up. • China’s General Administration of Quality Supervision, Inspection and Quarantine: in addition to 15 different segments of the food industry (rice, flour, edible oils, meat, dairy, instant noodles, biscuits and beverages), producers of 13 different food products (tea, confectionery) will also required to apply for licenses. (Sources: China Daily, http://english, com.cn; Food Quality News, http://www.foodqualitynews.com)

  19. I. Market AccessNon-Tariff Measures - China Food Safety: Recent SPS Regulations • Regulation of Inspection and Quarantine on Imported Meat and its Product, (2004-8-6) [G/SPS/N/CHN/79 ] • Administrative Rules of Inspection, Quarantine and Supervision on Entry of Fresh Fruit (2004-8-6) [G/SPS/N/CHN/80 ] • Hygienic standard for dried fruits (2004-4-21) [G/SPS/N/CHN/74 ] • Hygienic standard for nuts (2004-4-21)[G/SPS/N/CHN/75 ] • Hygienic standard for cream and sparse cream, (2004-4-21) [G/SPS/N/CHN/76 ] • Hygienic standard for edible animal fats(2004-4-21)[G/SPS/N/CHN/78 ] (Source: WTO, http:// www.wto.org)

  20. I. Market AccessNon-Tariff Measures - China Food Safety: Recent SPS Regulations a. Regulation of Inspection and Quarantine on Imported Meat and its Product, G/SPS/N/CHN/79, 2004-8-6 - Agency responsible:General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China. - Products covered:meat and its product (includes viscera) for human consumption. - Regions or countries likely to be affected :all countries and regions that export meat and its product (includes viscera) for human consumption to China. - Standard: international standards not used. (Source: WTO, http:// www.wto.org)

  21. I. Market AccessNon-Tariff Measures - China Food Safety: Recent SPS Regulations b. Administrative Rules of Inspection, Quarantine and Supervision on Entry of Fresh Fruit (2004-8-6) [G/SPS/N/CHN/80 ] - Agency responsible:General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China. - Products covered: fresh fruit. - Regions or countries likely to be affected :all countries and regions that export fresh fruit to China. - Standard used: International Plant Protection Convention (Source: WTO, http:// www.wto.org)

  22. I. Market AccessNon-Tariff Measures - China Food Safety: Recent SPS Regulations c.Hygienic standard for dried fruits (2004-4-21) [G/SPS/N/CHN/74 ] - Agency responsible:Ministry of Health and Standardization Administration of China. - Products covered: dried fruit. - Regions or countries likely to be affected :all countries and regions - Standard used: International Standard not used. (Source: WTO, http:// www.wto.org) .

  23. I. Market AccessNon-Tariff Measures - China Food Safety: Recent SPS Regulations d. Hygienic standard for nuts (2004-4-21)[G/SPS/N/CHN/75 ] - Agency responsible:Ministry of Health and Standardization Administration of China. - Products covered: nuts. - Regions or countries likely to be affected :all countries and regions - Standard used: International Standard not used. . (Source: WTO, http:// www.wto.org)

  24. I. Market AccessNon-Tariff Measures - China Food Safety: Recent SPS Regulations e. Hygienic standard for cream and sparse cream, (2004-4-21) [G/SPS/N/CHN/76] - Agency responsible:Ministry of Health and Standardization Administration of China. - Products covered: . Cream and sparse cream - Regions or countries likely to be affected :all countries and regions - Standard used: Codex Alimentarius Commission (International Standard). (Source: WTO, http:// www.wto.org)

  25. I. Market AccessNon-Tariff Measures - China Food Safety: Recent SPS Regulations f.Hygienic standard for edible animal fats(2004-4-21)[G/SPS/N/CHN/78 ] - Agency responsible:Ministry of Health and Standardization Administration of China. - Products covered: . Cream and sparse cream - Regions or countries likely to be affected :all countries and regions - Standard used: Codex Alimentarius Commission (International Standard). (Source: WTO, http:// www.wto.org)

  26. II. Domestic SupportIn General A a.“Green Box” measures: minimal impact on trade; excluded from reduction commitments. General government services: (a) Research, disease control, infrastructure and food safety; (b) Direct payments to producers, structural adjustment assistance, direct payments under environmental programs and under regional assistance programs. b. “Blue Box” measures: (a) Direct payments under production-limiting programs; (b) Certain government assistance measures to encourage agricultural and rural development in developing countries, etc. c. “Amber Box” measures: Total AMS Reduction Commitments: covers all support provided on a product-specific or non-product-specific basis that does not qualify for exemption; to be reduced by 20% (13.3% for developing countries) during the implementation period. (Source: WTO, http:// www.wto.org)

  27. II. Domestic SupportChina • China committed to cap and reduce trade-distorting domestic subsides. • China committed to provide better transparency regarding domestic support. • The amount of Art. 6.2 domestic support would be included in China’s AMS calculation. • Recourse to a de minimis exemption for product-specific support equivalent to 8.5% of the total value of production of a basic agricultural product during the relevant year. • Recourse to a de minimis exemption for non-product-specific support equivalent to 8.5% of the total value of production of total agricultural product during the relevant year. (Source: WTO, http:// www.wto.org)

  28. III. Export CompetitionIn General • Export subsidies on agricultural products are prohibited unless specified in a member’s lists of commitments • a.Direct export subsidies: to be reduced to a level of 36% below the 1986-90 base period level over 6 year implementation period • b.Quantity of subsidized exports: to be reduced by 21% over the same period. • c.Developing countries: 2/3 of developed countries over 10 year period; No commitments on subsidies to reduce the costs of marketing exports of agricultural products or internal transport and freight charges on export shipments. • d.“Peace” Clause: 9 year period • i. Certain actions available under the Subsidies Agreement will not be applied with respect to green box policies, domestic support, and export subsidies maintained in conformity with commitments • ii. “Due restraint” will be used in the application of countervailing duty rights under the General Agreement • iii. Setting out limits in terms of the applicability of nullification or impairment actions. (Source: WTO, http:// www.wto.org)

  29. III. Export CompetitionChina Issue: State-trading enterprises purchase agricultural products (grain, cotton) from farmers at higher prices and export these products at lower prices. Is it export subsidy? - China agreed not to provide funds to offset domestic companies’ losses accrued through exports. - China agreed not to maintain or introduce any export subsidies on agricultural products. (Source: WTO, http:// www.wto.org)

  30. Sources: Chinese Governments • MOFCOM (Ministry of Commerce): http://www.mofcom.gov.cn • SFDA (State Food and Drug Administration): http://www.sfda.gov.cn • Ministry of Agriculture: http://www.agri.gov.cn • Ministry of Health: http://www.moh.gov.cn • Standardization Administration of China: http://www.sac.gov.cn • General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China: http://www.aqsiq.gov.cn • SEPA (State Environmental Protection Administration of China): http://www.zhb.gov.cn • SAFE (State Administration of Foreign Exchange): http://www.safe.gov.cn • China Bio-Safety Net: http://www.stee.agri.gov.cn/biosafety END QUESTIONS?

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