The damage to domestic industry from soybean imports is deepening, and an effective response is urgently needed
In recent years, against the backdrop of comprehensive net imports of bulk agricultural products and prominent excessive imports, the impact and shock of soybean imports on domestic industry have drawn even greater attention. Since China's accession to the WTO, what has been the specific situation of China's soybean imports? What adverse effects have imports brought to the development of the domestic soybean industry and to farmers' income growth? How can the damage caused by soybean imports to domestic industry be effectively addressed? On these questions, a reporter recently conducted an exclusive interview with Ni Hongxing, Director of the Agricultural Trade Promotion Center of the Ministry of Agriculture, to hear his views and propositions on these issues.
Reporter: As we understand it, since China's accession to the WTO, China's soybean imports have continued to grow rapidly, and China has been the world's largest soybean importer for many consecutive years, with the soybean self-sufficiency rate continuing to decline. Please talk about the specific situation of China's soybean imports since its WTO accession.
Ni Hongxing: China is the country of origin of soybean and enjoys a uniquely advantageous soybean germplasm resource endowment; it was once the world's largest soybean producer and exporter. Since WTO accession, while demand for soybean has grown rapidly and imports have continued to increase in large volumes, domestic production has continuously decreased and the level of self-sufficiency has fallen sharply. Because the soybean market is highly open, soybean became the first bulk product to see a large and rapid increase in imports after WTO accession. From 2001 to 2015, soybean imports grew from 13.94 million tons to 81.69 million tons, an average annual growth rate of 14%, with an average annual import increase of 5 million tons. Imports come mainly from the United States, Brazil and Argentina, which have extremely strong basic agricultural competitiveness, with imports from the United States accounting for more than 40% of the total. At present, China's soybean imports account for more than 60% of world trade.
Reporter: What impact have imports had since WTO accession on the healthy development of the domestic soybean industry and on income growth for soybean farmers in the main producing areas? At the same time, as an important part of China's traditional grain crops, what impact does the continued large-scale import of soybean have on China's food security strategy of "moderate imports"?
Ni Hongxing: China is a country short of resources per capita; expanding imports helps increase the effective supply of agricultural products and ease the pressure of agriculture on resources and the environment. The question with soybean trade is not whether to import, but how to ensure that imports are moderate and appropriate. Excessive soybean imports, overly rapid growth and excessively low prices have directly affected the healthy development of domestic industry, not only impacting the employment and income of tens of millions of soybean farmers but also bringing potential risks to food security.
First, excessive imports have significantly squeezed and suppressed domestic production, so that domestic production not only failed to grow with demand but instead fell sharply. From 2001 to 2015, China's newly added soybean demand was 64.13 million tons, while imports increased by 67.75 million tons; 100% of the newly added market demand was taken by imported soybean, and the existing market was also encroached upon by imports. In 2015, China's soybean sown area and output were both down by 1/3 compared with 2004. Although China is short of agricultural resources per capita, there is still considerable potential to increase production under sustainable carrying capacity. Historically, China's largest soybean sown area reached 200 million mu, and at the current yield level, total output could reach 25 million tons. Without the impact of excessive imports, achieving a current soybean output of 30 million tons would be a relatively reasonable, feasible and sustainable choice.
Second, excessive imports have significantly depressed and suppressed domestic prices, severely affecting soybean production returns and weakening the foundation for sustainable industry development. The average soybean planting scale per household in China is 1/600 of the average planting scale in the main U.S. soybean producing areas, and the number of agricultural people that each hectare of cultivated land in China must support is more than a hundred times that of the United States. This determines that China's soybean industry lacks basic competitiveness and that the gap between China's soybean production costs and those of major exporting countries such as the United States continues to widen. At present, China's soybean production cost is more than double that of the United States. Because China applies a single 3% import tariff on soybean, large volumes of heavily subsidized foreign soybean flow straight in, so that domestic soybean prices can neither rise correspondingly with production costs nor increase correspondingly with demand, directly affecting China's soybean planting returns and the momentum for sustainable development. Since WTO accession, the cost-profit ratio per mu of soybean has fallen from more than 20% to -4% in 2014. An industry cannot develop healthily without reasonable profits.
Third, excessive imports have brought potential risks to national food security and have adversely affected the employment and income of soybean farmers. Large-scale imports have sharply reduced China's self-sufficiency level for soybean and even for edible vegetable oil; the soybean self-sufficiency rate has fallen from 53% in the early period after WTO accession to 13% at present, and the overall self-sufficiency rate for edible vegetable oil has fallen from 74% to 36%. The shrinkage of the soybean industry and the decline in planting returns directly affect the employment, income growth and livelihood security of millions of soybean farmers. It is precisely because of the shock of imported soybean that farmers in Northeast China had no choice but to switch to planting corn. Now the United States has again resorted to WTO dispute settlement over China's domestic policies on the three major staple grains, bringing enormous pressure for structural adjustment. The U.S. approach is unjustifiable in both sentiment and reason. It is worth noting that because edible vegetable oil is highly substitutable and soybean meal is mainly used as feed, excessive soybean imports have brought significant impact on the development of China's rapeseed industry, which is planted using winter fallow fields, and have brought ever-deepening challenges to feed grain production.
Reporter: As a WTO member, how can China use the rights granted by the WTO to effectively address the damage caused by soybean imports to domestic industry and safeguard the healthy development of its own industry?
Ni Hongxing: China's soybean market is highly open and applies a single 3% import tariff, and at the time of WTO accession we did not enjoy the special safeguard mechanism (SSG) that protects domestic industry when imports surge. The main reasons for excessive imports are China's lack of basic soybean competitiveness determined by scale, the severe insufficiency of import regulation means, and the fact that the important exporting country, the United States, strengthens its competitive advantage through agricultural subsidies.
If, after being hit by imports, individual industries such as soybean can still slow their substantive impact through structural adjustment, then when bulk agricultural products generally face import pressure, the impact of excessive soybean imports will be more comprehensive and widespread, and this must be effectively addressed. Safeguarding the food security of the 1.3 billion population and the livelihood needs of more than 600 million farmers is not only an arduous task facing Chinese agriculture but also an inevitable requirement for China to fulfill its commitments and promote the realization of the UN Millennium Development Goals. In the absence of effective tariff protection, China must more proactively use the rights granted by the WTO and trade remedy measures. At present, domestic soybean production has already suffered obvious damage, and in accordance with China's "two anti-dumping and countervailing measures and one safeguard" regulations, anti-dumping, countervailing and general safeguard measures should be launched in a timely manner, with comprehensive measures taken to effectively control excessive imports and maintain a reasonable domestic price level while not affecting the need for moderate imports, so as to ensure the healthy development of the domestic soybean industry.
In addition, there is a large gap between small-scale agriculture and large commercial farms in the level of risk management; risks that are controllable under large-farm management are not necessarily controllable in small-scale agriculture. In light of the characteristics of China's small-scale agriculture and the trend in recent years of increased quarantine pests and diseases and enhanced harmful organism damage brought by imports, import inspection and quarantine of soybean should be further strengthened on a scientific basis, and imported genetically modified soybean should be strictly supervised in terms of packaging, transportation, processing and labeling, so as to effectively reduce the risks and harm brought by imports. Support for soybean production should continue to be strengthened and improved, and an industry damage compensation mechanism should be established as soon as possible to provide necessary compensation to the damaged agricultural industries, regions and farmers.