USTR Report: Agriculture

Wednesday, December 20, 2006 19:29

Before getting into the services and IPR portions, the USTR spent a significant amount of time on agriculture. this is no doubt due to the importance of agriculture to U.S. exports, but also because in many ways this is one of the most difficult and risky areas of trade.

This section is divided as follows:

  • Tariffs
  • China’s Biotechnology REgulations
  • Tariff-Rate quotas in Bulk Agricultural Commodities
  • Sanitary and Phytosanitary Issues
  • Inspection-Related Requirements
  • Export Subsidies

Unlike the previous sections, the report is not so involved with the theoretical, but is instead a preactical view of how the theoretical timeline and progress have affected the exports of American ag products into China.

While overall, American exports have been improving dramatically in many categories, the report’s primary concerns are related to transparency. It is essentially the central issue for the report as a whole, and in this section it comes up over and over again as rules and regulations are not clear, application of such rules can be arbitrary, and in many cases delays can cause spoilage (which are essentially artifical barriers to entry)

Again, to gain a full understanding of the issues highlighted by the USTR report, readers should download the full report and review relevant sections.

Tariffs:
Overall, that average farmer cannot complain about tariffs not coming down as planned. since 1997 when tariffs were at 31%, the rates fell to an average of 14% in 2006. Sales of American goods have in that time seen large increases in exports year-on-year, and this trend is expected to continue.

The report states that the “full market access potential of China’s tariff cuts was not realized for some products”, but an example of these products was not given and the report alludes to the effect non-tariff barriers had on the market.

China’s Biotechnology REgulations:
As with nearly every regulation in the time since ascension, there have been problems, and this was also true in the ag sector. clarity concerns, applications, etc were all issues that the USTR reportedly had to follow up on. In many cases, issue were resolved, and just recently the government issued the last important piece of the puzzle when it announced the renewal requirements for safety certificates covering biotec crops imported for processing purposes.

Note: If you are a processor of cotton, soybeans, corn or canola, your license is set to expire in February of 2007… so better get moving

Tariff Rate Quotas (TRQs) on Bulk Agricultural Commodities:
With Regard to the TRQ section, the commodities of focus (read: concern) are the bulk items that could potentially be sold, in particular corn, soybean, cotton, and vegetable oils.

Again, the primary issue was the lack of transparency and the ability of local officials to use that opaqueness in manners that suited them. In 2004, the USTR noticed an improvement immediately following an NDRC policy change… thus proving that through clarification of issues domestically, it was able to have an immediate affect on the market.

Sanitary and Phtyosanitary Issues:
This section is of particular interest to U.S. exporters as these standards/ tests are an indirect way to hamper entrance. After all, cabbage that has been sitting on a dock waiting for proper documents does not sell as well as local heads of cabbage that are fresh from the fields.

To date, the USTR feels that there has been little progress on China’s end and that again it is a clarity issue as China has yet to fully explain or provide documents showing scientific data as to why some products (U.S. beef) are not allowed to be sod in China.

Other times, the USTR feels that imported goods are being forced to meet a higher standard than local goods (poultry products were the example of this).

Within this section, the USTR gives subsections to:

  • Pathogen Standards and REsidue Standards for Raw Meat and Poultry Products
  • Asian Influenza
  • Wheat
  • Food Additive Standards
  • Fire Blight

Inspection Related Requirements:
For companies to import products into China, they must receive a Quarantine Inspection Permit that is issued by the Chinese government. As reported by the USTR report, this process is often slowed down for international groups looking to gain this permit, and this has added uncertainty for exporters.

Export Subsidies:
The primary focus of this section is how China assists farmers export their goods, and they chose corn as they product to highlight. Interestingly enough, 2 paragraphs into it the report states that many experts and traders see China becoming a net importer of corn, and thus the export subsidy issue becomes rather irrelevant.

Wrap up:
American exporters of agricultural products are expected to see continued growth in china for their products, and while there are some issues with the transparency of some licenses and procedures, it does not appear to be having a significant impact on the growth of these exports.

As with every industry, in every region, and in every category, there are blind spots that companies need to worry about. China’s regulations the first time out are often very broad in nature, restrict more than they should, and seem very difficult to figure out. However, through industry dialogue with the government, these regulations are often honed down over time.

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