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U.S. – China Trade Agreement Good for Northwest Agriculture

PULLMAN, Wash. — The U.S.-China trade agreement signed today is good news for Northwest agriculture, according to Desmond O’Rourke, director of Washington State University’s International Marketing Program for Agricultural Commodities and Trade.

The agreement eliminates export subsidies for Chinese agricultural products, lowers tariffs on agricultural imports from an average of 15 percent to 14.5 percent and clears China’s entry into the World Trade Organization.

“Those are average tariffs,” O’Rourke said. “They don’t really have much meaning for individual commodities. The tariff on apples (the Northwest’s biggest export to China) is 30 percent. In addition, they have a value-added tax on all imports, which brings it up to about 57 percent. Once China is in the WTO, you can start bringing those down with the goal of getting them to zero.”

He said the U.S. exports less than $1 billion in agricultural products to China annually, mostly through the unofficial channels in Hong Kong to avoid tariffs. “When they are short of grain, the Chinese will import an additional $1 billion or $2 billion of U.S. wheat, corn or soybeans. A lot of apples, in particular, go in there plus some pears and other minor commodities.

“Once China is in the WTO, you can prevent the Chinese from suddenly putting an obstacle in front of our exports, such as they’ve done to wheat. They’ve used the excuse of TCK smut to keep our wheat out for over 20 years. Under WTO rules, that ban would have to be supported with science.”

TCK smut, also called dwarf bunt, is a fungal disease that causes dwarfing of wheat plants and turns the inside of the kernels into fungus spores. It sometimes develops in winter wheat crops around the world under specific environmental conditions, including continual snow cover. TCK smut is not toxic to humans or livestock.

In 1973 China instituted restrictions on imports of U.S. grain from regions where TCK smut is known to occur, stating concerns about infecting its own wheat crop. Bulk shipments from Northwest ports were banned. The U.S. has contended that the ban was not based on scientific evidence.

But bringing China under the rule-obeying control of the WTO will be a big step forward, O’Rourke said. The second will be making certain they play by the rules. “They’re going to have an adjustment period while they adapt to meeting international standards of rule of law.”

Growers should not expect immediate benefits from China’s entry into the WTO, O’Rourke cautions. “It will be 10 years before tariffs are low enough to make a difference. You’ve got to start sometime.

“Once we have access to the Chinese market, the potential is almost limitless. All the minor crops, like hops, asparagus and raspberries, would be able to get through. Growers also need to remember that the trade flow will be two-way. China is developing into a formidable exporter of many specialty crops and livestock products.”

China could be voted into the WTO at the organization’s meeting in Seattle at the end of this month.

“It would be a major public relations victory for the WTO and a major coup for China as well. The WTO has really been struggling to find anything to boast about in the past few months. China has been kind of an outcast on the world stage for a long time. This would make them a member of one more major world body.”

Most countries have few objections to China joining the WTO, O’Rourke said. “The big argument has been, under what rules would they come in. China wanted to come in as a developing country, which would give them a lot longer time to phase in their subsidy reductions.

“Europe and the United States thought they ought to come in as a developed country because they are such powerful exporters. We don’t know the exact terms of China’s entry. I suspect the agreement is a compromise.”

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