Not long ago, US President George W. Bush signed a new farm bill of US$180 billion over 10 years. The new farm law will increase spending by nearly 80 percent over the cost of continuing with existing programs. It will substantially increase price guarantees for American crops such as corn and wheat and will increase new subsidies for others such as soybeans.
The US Government is really generous and lavish, and the bill is greatly beneficial to American farmers. But what does the farm bill mean to Chinese farmers?
The United States is the largest agricultural exporter in the world. Last year American agricultural exports amounted to US$53.5 billion while its wheat takes 45 percent of the world wheat market, soybean 34 percent. Agricultural exports account for 25 percent of US farmers' gross sales. This means American agriculture is highly dependent on exports, actually more than twice as much as other sectors of the US economy. To expand international markets, the US policy-makers have continued to protect and subsidize its domestic agriculture and keep raising its food safety standards.
China is the fourth largest trading partner of the United States. The latter takes China as the most important growth market and the biggest market potential for its agricultural products, especially after China joined the WTO.
As conditions of WTO entry, China will open its markets, dramatically slash tariffs, eliminate export subsidies, cancel limitations on agricultural trade, abandon sanitary and phytosanitary barriers. All these will make it easier for US farmers and ranchers to sell their products to our country.
The United States expects that China's WTO accession will significantly boost its agricultural exports. According to a report by the US Department of Agriculture, the average annual US agricultural export to China from 2000 through to 2009 will increase by US$1.5 billion. This analysis does not include high-value agricultural products such as poultry, pork, beef, citrus, other fruits, vegetables, nuts, and forestry products.
All in all, great challenges are facing Chinese farmers due to our obvious agricultural disadvantages.
Everybody knows that, in terms of competition, China and the United States are inherently unequal. Chinese farmers on small plots of land cannot compete with Americans with big farms. In China, each rural household has less than half of hectare, but in the United States the size is 200 hectares or so. And our farmers' productivity is much lower than that of American farmers. The playing field is not equal.
The American farm bill will give US farmers incentive to overproduce, and eventually force farm prices down. US farmers will definitely benefit, but at the expense of a very large number of poor people in developing countries including China. This will be a threat to Chinese farmers. Under such circumstances, how can China reach American markets with its agricultural products, how can our farmers compete with American farmers?
The WTO and link with the United States may offer China new opportunities for broad-based agricultural development and poverty alleviation, but without fair trade relations, it will cause many problems, it will either bypass or harm Chinese poor farmers, particularly farmers in the centre and west of China.
The American farm bill is a dangerous signal.
Actually, in recent years, our farmers encountered many domestic problems and challenges that they had never met before. Among them, the most serious ones are excessive food supply and low prices. Between 1997 and 2000, the growth rate of farmers' income kept falling. Meanwhile, the per capita income gap between urban and rural residents also notably widened. In 2000, the ratio between these two was over 3:1.
(The author is director of the Centre for Rural Policy under the Chinese Academy of Social Sciences)
( June 17, 2002)
