Details of China-US farm-subsidy deal still under wraps

by Antoaneta Bezlova

Beijing, 20 Jun 2001 (IPS) - Chinese trade officials have been slow to reveal details of the farm-subsidy agreement reached between Beijing and Washington to speed up China’s accession into the World Trade Organisation (WTO).

Almost two weeks after the two sides reached a compromise on farm subsidies, details of the deal have yet to be announced, betraying fears that concessions made by Beijing - which could result in a deluge of foreign agricultural products into the Chinese market - might anger farmers and other affected sectors.

US officials say China has agreed to cap its domestic agricultural subsidies at 8.5% of the value of production in a move to kick-start stalled negotiations over its WTO entry.

Beijing had pushed for a 10% ceiling, generally granted to developing countries.

But US negotiators demanded the 5.0%ceiling for developed nations.

The deal - agreed in talks between Beijing and Washington on the sidelines of the Asia Pacific Economic Co-operation ministerial meeting in Shanghai earlier this month, was seen as a compromise for both sides.

“This understanding is a win-win result for China and the US,” said United States trade representative Robert Zoellick. “It should help us and the other members of the WTO to try to complete China’s accession this year,” he was quoted as saying at the weekend.

According to the US announcement, the 8.5% subsidy would cover both general agricultural and specific product support. US officials reportedly delayed the announcement of the deal until Chinese leaders formally endorsed the pact.

However, Beijing still has to confirm the content of this latest agricultural agreement.

Farm subsidies had been a sticking point throughout China’s WTO accession negotiations with the United States and other major agricultural exporters.

China, whose agriculture sector would be hardest hit by its admission into the WTO, fears its entry into the world trade club would result in an inflow of foreign agricultural products that would worsen the plight of millions of poor farmers. According to official estimates, 9.7 million farmers will lose their livelihoods in the seven years after accession, because cheaper imports of grain and other foodstuffs will make their production uneconomical.

The importance of farm subsidies was underscored by Long Yongtu, China’s chief WTO negotiator in late March after the previous round of talks on agriculture with Washington ended in disagreement.

“The result of negotiations should be a victory for both sides,” he said. “To achieve this, each side can make some small or large concessions. But we absolutely can not give up this principle (of the right to farm subsidies) as the price of entry into WTO.”

Chen Xiwen, deputy-director of the State Council Development Research Centre and one of China’s top rural specialists, says the issue of farm subsidies is a particularly sensitive one.

“In China, the relationship between farmers and government financing differs from the relationship between government financing and state employees. The land [that] farmers farm is contracted to them, and in a way, farmers are independent business operators. By contrast, state employees get their salary rises directly from the coffers of the government.”

While urban residents saw their salaries rise twice in the last three years, the plight of farmers has worsened since 1996, with prices of farm goods declining and the growth in their incomes falling each year.

The average farm income last year was 1,640 yuan (197 US dollars), an increase of 2% over 1999, while the average urban income rose 7% to 6,280 yuan (757 US dollars).

Grain stocks are at record levels and more than 100 million rural residents have no work. In some areas, exasperated by illegal taxes and levies, peasants have protested and rioted.

In this light, the news that Beijing had agreed to cap its subsidies at 8.5%, instead of 10%, might resonate painfully through the countryside.

The US Department of Agriculture forecasts that after China’s WTO entry, annual exports of US farming goods to China would rise by $2 billion, which undoubtedly is going to hurt domestic agricultural enterprises.

Depression is already sweeping rural areas. As farmers cannot yield profits from their tiny plots, they are simply leaving the land and emptying the countryside.

Since the early 1990s, when Chinese leaders relaxed the rules tying people to the land, more than 80 million peasants have fled the poverty-stricken countryside and flooded China’s cities in search of jobs as street sweepers or garbage collectors.

But having encouraged such limited labour mobility at first, authorities are now panicking. Police have been ordered to arrest all migrants who lack proper work or resident’s permits. Last year alone, more than 250,000 of Beijing’s three million rural migrants were sent back home.

Nevertheless, allowing large-scale migration of rural people into urban areas is the only solution to China’s agricultural woes, according to Chen Xiwen.

“The number of farmers must be reduced to effectively enrich farmers,” he says.  “In this sense, it will be extraordinarily difficult to develop the agricultural industry and rural areas without accelerating urbanization.”

Chen adds: “Taking the initiative to promote urbanisation and moving surplus agricultural labour to towns and cities is crucial to the resolution of  contradictions in rural areas and increasing farmers’ incomes.” – SUNS4919

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