Opportunities and Challenges

China’s entry to the WTO has brought not only opportunities to China’s agricultural development, but also the many challenges that are associated with economic globalization and foreign competition. In 2008 as the financial crisis swept the world, China’s agricultural exporters like Liu also felt the pinch.

In the wake of the financial crisis, governments of many countries around the world put much effort into bringing the world economy back on track. Owing to the European sovereign debt crisis and the slow recovery in the U.S., however, the world economy has not been recovering as quickly as hoped. In addition, underlying tensions and issues of contention continue to complicate the international trade environment. In order to protect domestic markets and their own domestic interests, many countries have introduced protectionist measures. “Green” barriers to trade started off as a good idea, but now have been hijacked by entrenched interests and strong lobby groups, and constitute a major new form of protectionism. Green barriers are, what’s more, inconspicuous and more subtlety implemented in comparison with straight-out tariffs and government subsidies.

As people around the world pay greater attention to environmental protection and food safety, governments, especially those of developed countries, have been exploiting their citizens’ good intentions by proffering food safety standards that are overly burdensome for developing countries, which lack the technology to implement them. No time frame has been given to allow developing countries to adjust, and imports of farm products from poorer countries to rich ones have been obstructed.

According to WTO statistics, more than 40 percent of notifications on Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) measures are made by developed countries. The U.S., EU member states and Japan lead the world in terms of food technology and safety management, and WTO rules reflect their world-leading practices without due consideration of the lack of technology on the ground in the rest of the world.

“Since China joined the WTO, developed countries have found it difficult to curb imports from China with quantitative restrictions like tariffs and quotas; they seem to have resorted to the excuse of green barriers where other measures have failed,” says Zhong Funing.

Green barriers have long existed in international trade, and green measures were intensified even before the financial crisis. In May 2006, Japan introduced the Positive List System for Agricultural Chemical Residues in Foods, which posed an unprecedented challenge to Liu Shili’s company. The system established provisional Maximum Residue Levels (MRLs) for 758 agricultural chemicals, in addition to existing MRLs, and a uniform limit of 0.01 ppm for residues not on the list. After implementation, foods containing residues exceeding the MRLs on the list, or 0.01 ppm in cases where no standards are established, were prohibited in Japan. The Positive List System is seen as the most rigorous residue standard in the world.

Regulation has become even more stringent in recent years. “The U.S. Food Safety Enhancement Act passed in 2009 stipulated that country of origin must be identified on food labeling. I don’t think this piece of regulation is reasonable,” said Fang Pengyu, an exhibitor at the 2011 China Import and Export Fair. “There is scant scientific evidence that shows food quality is related to place of origin. The labeling could mislead consumers, and it serves to spread fear on the back of misplaced country stereotypes.”

Today, green barriers have become a major obstacle to China’s agricultural exports. According to statistics from the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-products, in 2009 WTO members issued 1,890 TBT notifications and 1,108 SPS notifications, including around 200 SPS notifications and 160 TBT notifications issued by 48 members directly affecting China’s agricultural trade. SPS measures could hence cause losses in China’s agricultural sector of US $10 billion in international trade annually.

China’s Vice Minister of Commerce Fu Ziying said in a speech at the 2011 China Import and Export Fair: “Agricultural exports have been increasing, but changes in the exchange rate, rises in costs of production and the growing number of technical barriers to international trade will affect the future of China’s agricultural exports.”

Industry insiders hold that China will become more affected by green barriers as their scope continues to broaden. Nowadays, green barriers directly targeting China are championed by both developed and developing countries.

“The ‘China Threat Theory,’ fuelled by the country’s strong and steady economic development, is perhaps one underlying reason why foreign countries are setting up so many green barriers,” Zhong Funing said.

Dealing with the Problems

China is a big agricultural country whose imports and exports of farm products play an important role in its foreign trade. Expanding exports of farm products has always been a crucial part of the country’s agricultural policy. At present, China is the fourth largest agricultural exporter in the world and ranks number one among developing countries.

As a developing country, however, China still has a long way to go to become an efficient agricultural exporter. Besides exterior barriers to international trade, there are also lingering domestic issues such as much talked-about low food safety standards.