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Cotton fails to meet expectations
2001-12-31
Business Weekly
China's accession into the World Trade Organization (WTO) has meant higher import quotas for foreign farmers, but this development may not necessarily bring them export volumes to match.
"China's agricultural imports will continue to gradually grow for a long time, but the amount has hardly yet reached the targets set by foreign farmers and farming enterprises," said Lu Feng, an agricultural economist with Peking University.
The most recent commodity to disappoint foreign farmers was cotton.
In a letter earlier in December, a group of 11 US senators from southern states urged US Trade Representative Robert Zoellick to consider taking legal action against China for failing to honor its commitment to open its cotton market.
In the first 11 months of this year, China imported 134,000 tons of cotton, up 257.6 percent over the same period of last year. About 50 percent of those imports came from the United States.
Despite the tremendous growth, the US senators and the industry complained that China has not lived up to the quota it set when it joined the WTO last year.
China promised to increase its annual import quota for cotton to 818,500 tons after its entry into the global trade body. Tariffs for the imports within the quota were to be only 1 percent.
The quota was set based on the average level of China's cotton imports between 1996 and 1998.
"Imports between 1996 and 1998 were abnormally high because the domestic market was distorted, and the quota based on import volume in that period can hardly be used up by Chinese cotton importers," Lu said.
In 1996, when China's cotton output had suffered great losses due to bad weather, the country dramatically increased its imports. According to Lu, due to the delayed reaction of policymakers in 1997 and 1998, the abnormally high imports remained despite China's ample cotton harvests in those years.
Therefore, the quota set for cotton did not truly reflect China's import demand, said Lu.
Besides cotton, China also promised an annual import quota of 8.468 million tons for wheat and 5.85 million tons for corn. Foreign farmer groups, especially those from the United States, Canada and Australia, enthusiastically greeted China's WTO accession last year due to the country's promised high quota of grains and cotton.
Between January and September, China imported 580,000 tons of wheat but did not import corn.
"The high import quota and relatively lower factual imports of farming products reflect the distance between foreign farmers' high expectations for the Chinese market and the factual demand of the market," Lu said.
But the US cotton group said that China has done nothing to level the playing field for imported cotton fiber.
Du Min, a cotton expert with the Rural Economic Research Center under the Ministry of Agriculture, said that the import quota has been distributed among individual textile enterprises, and whether to use domestic cotton or imported cotton is their own choice.
In 2002, due to a global cotton output reduction, international cotton prices have increased, though they are still slightly lower domestic prices.
With shipping and transaction costs added in, however, the price of imported cotton winds up a bit higher than for domestic cotton.
In such circumstances, some foreign farm groups will complain that China has not lived up to its import-quota promises or that it has not honored its market opening commitment, said Du.
"It shows that many foreign farmers and farming groups do not understand Chinese circumstances," Du said.
These complaints, such as the one made by the US senators, are unlikely to lead to a trade war or WTO dispute settlement proceedings against China, however.
"After all, China has greatly increased its imports of cotton and other grain products and slashed its tariffs on farm imports," Du said.
Du predicts that China's imports of cotton will increase in coming years because of its booming textile industry and dwindling area of cotton-planted land, as well as a decrease in cotton stocks.
Lu of Peking University said that the country's grain imports will grow as well due to China's agricultural restructuring, which is expected to reduce the area planted with grain and cotton and increase the area planted with fruits and vegetables.
In the long run, foreign farmers should harvest great benefits from China's WTO entry, though not as much or as quickly as they expected," Lu said.
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