A new trade deal between between the United States and China shouldn’t have an adverse effect on Canadian grain sales to the world’s most populous country, says a Canadian Wheat Board analyst.
“I don’t believe there should be any impact,” said Jacqueline Wu, who follows markets in the Asia Pacific region for the board.
U.S. wheat organizations have welcomed the recent vote in the House of Representatives to grant so-called permanent normal trade relations or PNTR, to China.
They say the agreement will pave the way for a 10 percent increase in total wheat exports every year.
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Wu said the granting of PNTR changes neither the existing trade relationship between the U.S. and China, nor the U.S.’s competitive position relative to other exporters.
“It is actually just a continuation of the current situation,” she said. The only significant difference is that previously China’s trade status was reviewed annually by the U.S., whereas now it will be permanent. The quest for PNTR status is related to China’s upcoming entry into the World Trade Organization.
All countries will be guaranteed the same level of access to the Chinese market once that country formally enters the WTO, Wu said, so no one exporter will gain a particular advantage over others.
Wheat organizations such as the National Association of Wheat Growers and U.S. Wheat Associates lobbied hard for PNTR with China, saying it will provide huge new opportunities for wheat exporters.
“What China offers is available nowhere else in the world – a major and continuing impact on U.S. wheat exports,” said Alan Tracy, president of USWA, a producer-funded agency that promotes wheat exports. He said the deal provides American wheat producers with “meaningful access” to one-fifth of the world’s consumers.
Terry Detrick, an Oklahoma wheat farmer and president of the National Association of Wheat Growers, said PNTR will provide “overwhelming benefits” to U.S. wheat producers.
“To put it plainly, nothing else on the horizon could have such a big impact for the short term on U.S. wheat exports and the economic stability of wheat producers, or hold such potential for expanded growth in the future,” he told a House agriculture committee hearing before the vote.
The wheat groups say the agreement with China will provide a number of specific benefits for wheat producers.
The tariff rate quota for wheat would rise to 7.3 million tonnes upon China’s entry into the WTO and increase to 9.3 million tonnes by 2004. The tariff for that tonnage will be one percent, lower than most Asian countries.
“If the U.S. could get 40 percent of those sales, we would increase the total U.S. wheat annual exports by 10 percent,” said USWA.
China’s total wheat imports have declined from over 12 million tonnes in 1995 to about one million in 1998, as a series of bumper crops have moved the country toward self-sufficiency.
All exporters have felt the resulting pinch. Imports from the U.S. have declined sharply from as much as 5.5 million tonnes, dipping to just 195,000 tonnes in the most recent marketing year. Canadian wheat sales have dropped from the four to five million tonne range to just 220,000 tonnes (along with 300,000 tonnes of barley) last year.
The American deal provides for other developments:
- Elimination of export subsidies upon WTO accession.
- A requirement that China’s state-owned and state-invested enterprises act on a commercial basis.
- Lifting of long-standing restrictions on imports of U.S. wheat from areas where the TCK wheat fungus is known to occur.
The PNTR legislation now must be approved by the U.S. Senate, which is expected to vote later this month.
As of last week, China had negotiated bilateral deals with all but a handful of the WTO’s 135 member countries. Once that is done, a “protocol for accession” will be developed to outline the format for bringing China into the organization and ensuring that its trade laws are consistent with WTO rules. Observers says China’s formal entry into WTO is probably a couple of years away.
