On September 13th, 2016, The United States initiated WTO dispute proceedings against China regarding China's domestic support in favor of agricultural producers of, among other crops, wheat, Indica rice, Japonica rice, and corn. The U.S. claimed that China had provided domestic support to the products mentioned above in excess of its WTO accession commitment, and has violated the Agreement on Agriculture.
As the largest exporter of agricultural products, the U.S., with large production scale and strong competitiveness, produces agricultural commodities mainly for export. By contrast, China is the largest importer of agricultural products, with its agriculture characterized by small scale production and subsistence farming. The average production scale of China per household is only 1/400 of that of the U.S.. Suffice it to say, the U.S. and China are the typical examples of commercial agriculture and subsistence agriculture. By its nature, initiating WTO dispute proceedings against China by the U.S. represents the conflict between interests of large commercial farmers in the U.S. and livelihood of small holder farmers in China. How to comment on this? Has China, the biggest market for U.S. agricultural products, harmed the commercial interests of the U.S. large farm owners by providing subsidies to small farmers? With the impact of excessive import of agricultural commodities being intensified on China, how can livelihood of small farmers be secured?
I. Digging into the impact of U.S. agricultural products exported to China, it is the commercial interests of the U.S. that harm the livelihood of small Chinese farmers.
China, after its WTO accession, has a highly open agricultural market. As a result, the U.S., with its farm exports swarming into China, has caused sustained harm to small Chinese farmers. Since 2001, the U.S. has exported its agricultural products to China at an increasing speed, from less than 2.8 billion dollars to 28.8 billion dollars at its peak, doubling every four years. The average trade deficit of China to the U.S. in terms of agricultural products has reached 20 billion dollars annually, and China has become the largest export market for U.S. agricultural products.
In recent years, the large amount of agricultural products imported by China has caused increasingly severe impact on Chinese agriculture, from which small farmers suffered a lot. With farmers' income being affected, China is now facing huge pressure in agricultural restructuring. Before 2010, imports such as soybean and cotton from the U.S. impacted China's production by suppressing its growth, by taking the market share of Chinese products, and thus prevented the increase of domestic production that would have occurred following the growth of domestic consumption. From 2001 to 2010, Chinese soybean consumption has increased by nearly 150%, and cotton, 100%. However, the production of soybean has stagnated, whereas cotton has only increased 12%. In the meantime, China has imported 3.1 times more soybean and 15.2 times more cotton from the U.S. than in 2001. After 2011, the impact has turned into real direct suppression. The excessive imports of soybean and cotton have caused a decrease of sown area of 46 million mu (3.07 ha) and 32 million mu (2.13 ha) respectively for these two products, and a decrease of production of 5.6 million tons and 2 million tons respectively. Divided by average production area per household in China, the excessive import of these two products has done harm to the employment and livelihood of 50 million farmers.
The reason why small farmers in China have suffered from commercial exports of the U.S. products is that China's agriculture lacks basic competitiveness due to its small scale. In addition, a highly open market has, to a great extent, limited China's instruments of regulating the market. The U.S., with its subsidies to agriculture, has strengthened its competitiveness.
