China’s accession to the World Trade Organization (WTO) in 2001, after 15 years of
difficult negotiations, was a momentous event for China and for the world economy. In its
accession commitments, China agreed to substantially reduce its barriers to imports and
become a much more open economy. Surprisingly, and very pleasingly, China’s
commitments to reduce import barriers against agricultural imports were very substantial.
Given the enormous size of its economy and the rapid rate at which it is growing, the
opening of China’s agricultural market presents huge opportunities for efficient exporters
of agricultural products, such as Australia. At the same time, because reducing trade
barriers will help China’s agricultural sector to become more efficient, China will also
increase its agricultural exports.
However, China’s accession to the WTO did not have unanimous approval within the
country. There was significant concern within China about the prospect of the country
becoming more dependent upon food imports, particularly grain imports. Some of this
concern is legitimate, because international food embargoes have been used in the past—
although they have never been very effective. Other concerns were about maintaining
‘food self-sufficiency’, which is more a means of lobbying for support of the agricultural
sector—particularly to maintain inefficient industries. There were also concerns about
the increase in income inequality between rural and urban households and the fear that
this inequality would increase as the economy opened up to agricultural imports.
This report is the culmination of several years of economic research, funded by the
Australian Centre for International Agricultural Research (ACIAR), into the effect of
China’s WTO accession commitments on its agricultural sector. In large part through the
use of general equilibrium models—of global trade between countries and of trade
between regions within China—the researchers have examined the likely effects of
China’s accession to the WTO in many areas, including production and trade, by
commodity and by region; income inequality between rural and urban households, both
within and between regions; labour mobility between the agricultural sector and other
sectors and between rural and urban areas; the influence of different macro-economic
policies on the effects of accession on the agricultural sector; and the economic costs of
trying to maintain grain self-sufficiency at existing levels.
The results of the research show that trying to maintain the existing level of food selfsufficiency
would be extremely costly for China. It also shows that attempting to reduce
rural–urban income inequality through tariffs, subsidies or other methods of support to
agriculture, would also be very costly to the welfare of China’s society as a whole. It
appears that WTO accession will mean that the agricultural sector will have to make
substantial adjustments—in particular, moving out of land-intensive activities, such as
grain production, and into labour-intensive activities, such as horticultural products and
agricultural product processing, where its comparative advantage lies. The significant
shifts in China’s agricultural trade since 2001 indicate that structural adjustments are
already taking place.
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