TRADE WITH CHINA

Overview

The Peoples Republic of China, with a population of more than 1.25 billion, is considered the most important growth market for U.S. agriculture in the 21st century. Although it has more than 20 percent of the world's population, China has only seven percent of the arable land. China's impressive growth in national income is projected to lead to increased consumption of food and fiber. At the same time, growing resource constraints on agricultural production are making China increasingly reliant on trade.

Although the United States has supplied almost all of China's corn imports in recent years, China has been a sporadic customer. U.S. corn exports to China spiked in 1994-95 at about 130 million bushels. In 1996-97 China did not import any U.S. corn. The average for the last five marketing years is 47 million bushels. However, we have the opportunity to immediately triple that average if, when China joins the World Trade Organization (WTO), the United States is prepared to grant China permanent normal trade relations.

Last year, China and the United States reached agreement on agriculture and other bilateral trade issues. Key provisions of the agreement will help increase U.S. corn exports:

• Tariff reductions will take place immediately upon China's accession.



• China will use a tariff-rate quota (TRQ) to allow imports of approximately 4.5 million metric tons (177 million bushels) of corn in the first year, rising to 7.2 million tons (283 million bushels) in the fourth year.



• To assure that the quota is used, 25 percent of the TRQ will be available to the private sector in the first year, increasing to 40 percent in the fourth year.



• Sanitary/phytosanitary measures will permit exporters to ship grain, including corn, through the Pacific Northwest.



• China has agreed to eliminate export subsidies. This is particularly important to U.S. corn farmers because China has increased its corn production in response to high domestic support prices and has exported the resulting surpluses at the expense of U.S. corn farmers. The U.S. Department of Agriculture projects that China will export 354 million bushels of corn this year and import 10 million bushels, for net exports of 344 million bushels. If China no longer subsidizes its corn exports, U.S. corn will be very competitive in markets that have been buying subsidized Chinese corn

U.S. producers will not benefit from this agreement until all WTO accession negotiations are completed and Congress approves permanent normal trade relations for China.

Action Needed

NCGA urges the Senate to pass the House version of the China PNTR bill without amendment and without further delay.

ST. LOUIS OFFICE

WASHINGTON D.C. OFFICE