China Should Become More Open from Trade Pact

November 16, 1999

White House National Security Advisor Sandy Berger believes China should become a "more open and hopefully more pluralistic" country because of the U.S.-China trade pact finalized over the weekend in Beijing. The latest round of talks dealt with issues other than agriculture. Agricultural trade issues were resolved last April.

"In order for China to have made this decision to open its markets to competition, it's going to have to move forward on its internal reforms to make its industries competitive,"Burger told reporters. "All of that will make China, I believe, a more open and hopefully more pluralistic place."

Some minor changes apparently were made in the agricultural section of the pact, but otherwise it was the same deal U.S. and Chinese negotiators worked out in April: Beijing will reduce tariffs on farm imports from an average of 31.5% now to 14.5% by January 2004. China also will eliminate export subsidies, establish tariff rate quotas on wheat, corn, cotton, barley and rice, and permit private trading in agriculture for the first time.

Berger says the areas resolved in the latest agreement include "import surge mechanisms," or "what happens if there is a large increase in imports of a particular product." In addition, motion pictures, Internet access, satellites, auto financing, securities and a dialogue on capital markets were among the issues resolved.

"Obviously it substantially opens access to the largest market in the world," Berger adds.

However, REUTERS reports from Hong Kong that China will not be a big buyer of U.S. corn or wheat in the immediate future despite the trade deal. Traders say China's large supplies of corn and wheat and low domestic prices will limit imports initially.

"China has huge stocks of corn and prices are low," the article quotes one trader, "so I would not expect sales to come pouring in." Another said, "Unless there is a disaster, I don't see China importing very much wheat."

An article from Shanghai, filed by BLOOMBERG NEWS, says Chinese farmers stand to lose $662.6 million in annual earnings because of the agreement. The article quotes the Shenzhen Securities Times.

Losses will come as U.S. wheat imports more than double to 5 million tons from 2 million tons, the newspaper said. Opening the protected agricultural sector to foreign competition could threaten the livelihood of farmers who make up some 80% of China's 1.3 billion population.

The April agreement included a provision for no tariff rate quota for U.S. soybeans, and the duty is bound at the current applied level of 3%, says the American Soybean Association. Soybean oil will be subject to a 9% duty, and the TRQ quantity will be based on average 1995-97 calendar year imports calculated on the basis of data from Oil World, an international authority on oilseeds supply and demand.

ASA President Marc Curtis said the agreement "paves the way for expanded access to the Chinese market, our most important growth market of the future."