Analysis of the Development Trends of Agricultural Product Trade Under the New Normal
The 2015 Central "Document No. 1" focused on "agriculture, rural areas and farmers" for the 12th consecutive year, highlighting "sustainability" and sending a clear signal for the development of modern agriculture. China is a country with a large population, and food security is no small matter; the "agriculture, rural areas and farmers" issue has always been closely watched by the top leadership.
How can we ensure that Chinese people have enough to eat? How can we give ordinary people peace of mind about what they eat? How can we make full use of both the international and domestic markets and both types of resources to develop China's modern agriculture and advance agricultural modernization? With these questions in mind, during the National Two Sessions, the reporter interviewed Niu Dun, who had just been transferred from Vice Minister of Agriculture to Permanent Representative to the UN Food and Agriculture Agencies.
Niu Dun, a graduate of Beijing Agricultural University, had been engaged in research and management of agricultural issues for more than 30 years. Since being transferred to work at the Ministry of Agriculture in 1992, Niu Dun had participated in WTO agricultural negotiations and the formulation of multiple international agricultural agreements, conventions and standards. In particular, since becoming Vice Minister of Agriculture in 2004, Niu Dun had been in charge of international cooperation and had done a great deal of work in promoting and strengthening multilateral, bilateral and regional international cooperation and exchanges. Recently, Niu Dun, who had reached the age of sixty, became Permanent Representative of the People's Republic of China to the UN Food and Agriculture Agencies and stepped down from the post of Vice Minister of Agriculture.
How should we view the agricultural product trade deficit?
Reporter: In 2011 China surpassed the United States to become the world's largest importer of agricultural products. At present, domestic agriculture is being impacted by cheap foreign agricultural products. How do you view this problem?
Niu Dun: Last year, China's imported agricultural product trade volume was more than 110 billion US dollars, and exports were roughly more than 60 billion US dollars. At present, China's agricultural product trade is in a deficit state, at roughly more than 50 billion US dollars.
We hope to promote the trade and development of agricultural products, which is conducive to our competitive agricultural products entering the international market. China's currently relatively competitive agricultural products are aquatic products and others, while the imports are mostly foreign soybeans, edible oil, cotton and so on. We also imported a portion of grains, including corn, wheat, rice and so on. Through agricultural product trade, a contribution has been made to the healthy development of domestic and international agricultural product trade.
Speaking of impact, we should also look at it from another angle: this is in fact also a major-country effect. Whatever variety of agricultural product China imports, the import volume is large in the world agricultural product trade market, but after being imported into China, compared with China's total amount of various agricultural products, it is a very small proportion.
Last year China imported about 14 million tons of grain, and this volume caused a great reaction in the world trade market. But this amount accounted for less than 3% of China's total grain production. At present, China's grain production self-sufficiency rate is 97%, and our bottom line for food security is a self-sufficiency rate of 95%.
Reporter: At the Central Rural Work Conference and the National Agricultural Work Conference held at the end of last year, and in this year's Central "Document No. 1", it was said that we should make full use of both the international and domestic markets and both types of resources to develop our modern agriculture and advance agricultural modernization. Please talk about what kind of international situation China's foreign trade in agricultural products faces.
Niu Dun: Agricultural product trade is rather special. Basically every country hopes to export more and import less or even not import at all, because only in this way can it improve agricultural efficiency and promote farmers' income growth. If imports are too large, they will certainly suppress domestic agricultural product prices, affect farmers' enthusiasm, and even lead to the shrinking of domestic agriculture and reduced competitiveness.
To speak of the international market, we must mention the WTO. The advantages that joining the WTO brought to China's foreign trade need not be elaborated, but when China joined the WTO, it also promised certain import "tariff quotas" for agricultural products, such as the 7 agricultural products of wheat, corn, rice, cotton, sugar, wool and wool tops. Although what was promised was a possibility, now certain countries use this as a reason to turn the possibility of market imports into a mandatory obligation, and they still do not recognize our status as a market economy country. This requires negotiation.
Another matter: when joining the WTO, we promised to substantially raise China's market access level for agricultural products and lower tariffs. Now China's average tariff on agricultural products is 15.1%, one quarter of the world average tariff level, which shows that the openness of China's agricultural product market is at the forefront of the world.
But if we look at certain countries in turn, their tariffs on competitive domestic agricultural products are very low, while tariffs on agricultural products they need to import are very high. For example, the tariff level on agricultural products the United States needs to import is mostly above 100%, while some European countries can reach 100%? 800%. These trade barriers are also unfavorable to China's foreign trade in agricultural products.
Reporter: Under such a trade environment, how can we seek an active position in agricultural product trade and win space for the development of domestic agricultural products?
Niu Dun: In 36 years of reform and opening up, my own experience is that we Chinese have created a market with huge demand and huge potential. A market economy is about supply and demand; we create demand, and this is the driving force of social development. Facing this market, we should study how to make it benefit Chinese enterprises and Chinese farmers. Let China's agricultural products demonstrate efficiency in this market.
One point is to increase agricultural product exports, demonstrate agricultural efficiency, and increase farmers' income. At the same time, reduce imports of agricultural products, protect our interests, and let the products produced by China's agricultural system and farmers meet China's domestic demand. This is a powerful measure to boost domestic demand, and also to improve domestic agricultural efficiency and raise farmers' income.
Reporter: You have long worked in the Ministry of Agriculture and have also participated many times in international agricultural exchanges and cooperation. Regarding the production and trade of agricultural products, how have foreign countries done it?
Niu Dun: We can look at the experience of the United States. The United States is a country of a completely market economy, but the planning of American agricultural production is very strong. Their plans mainly consider two points: first, meeting domestic needs; second, global layout, which market to occupy and where to export. After meeting the above two points, what if agricultural production capacity is still excessive? The United States and the European Union created a trade policy specially in the WTO that benefits their agriculture--the "Blue Box Policy" (BlueBoxMeasures). The "Blue Box Policy" provides that payments related to production-limiting programs can be exempted from reduction commitments (such as differential payments for fallow land), and certain direct payments are given under production-limiting programs. That is, when there is overcapacity, the government tells farmers not to plant grain anymore, but to plant grassland, and gives even more subsidies.
After China joined the WTO, there have been no subsidies for agricultural product exports. Although this conforms to the requirements of a market economy, compared with the aforementioned policies of Europe and the United States, is competition fair? Therefore I suggest that in the next step we should increase investment in agriculture, formulate policies favorable to agriculture, carry out the construction of a socialized service system favorable to agriculture, continuously improve the quality of agricultural products, reduce the costs of China's agricultural products, and improve competitiveness.
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Reporter: In market behavior, we have found that some industries tend to import foreign products because they are relatively cheap. Moreover, the tariff quota mechanism is now beginning to be questioned by some people abroad and even in China. How do you view this?
Niu Dun: The tariff quota mechanism cannot be challenged in China. When joining the WTO, we said that China is a new member of the WTO, a developing country, still has many farmers, and agricultural products concern China's national economy and people's livelihood. We must have certain regulatory capacity and means. What I want to state clearly is that the import tariff quota mechanism for agricultural products cannot be changed and cannot be challenged.
We will not import large quantities of foreign agricultural products whose prices are much lower than domestic agricultural products, because doing so will certainly suppress domestic agricultural product prices, and the production enthusiasm of agricultural workers will also be affected, and the development of the agricultural national industry will be affected. No country would do this either.
However, this is a contradiction. Under the market mechanism, with this kind of price inversion, whether enterprises, market entities, or market operators, all seek profit and pursue maximization of interests, so they will import low-priced agricultural products and sell them domestically to earn a price difference. In this situation, we can use regulation, and more importantly, we must do our own work well.