WTO boost to China grain trade clouded by GMO worry
Date: 20-Sep-01
Country: CHINA
Author: Lee Chyen Yee
But Beijing's murky rules on genetically modified organisms (GMO) have cast a shadow over prospects for soybean trade and last week's devastating attacks in the United States have sparked worries about higher freight costs, traders said yesterday.
A WTO working party in Geneva gave the green light on Monday for China's terms of entry, clearing the way for membership by the end of this year.
"Of course quicker entry to the WTO is great news for us because it means we have more import opportunities and that will bring high domestic prices more in line with global prices," said a trader with a world grains firm in Shanghai.
Traders are pinning their hopes on tariff cuts on sensitive government-controlled commodities like wheat, corn and cotton under the WTO tariff-rate quota system.
The quota, which drops tariffs while increasing imports, would allow China to import 7.3 million tonnes wheat in the first year of entry at low duties. The amount would increase to more than nine million tonnes per year over the next five years.
China's wheat imports are now mainly limited to tolling - processing and re-exporting.
The country of 1.3 billion people imported a mere 190,000 tonnes of wheat in the first seven months of this year, 75.3 percent less than in the same period of last year, according to customs figures.
"Now you don't really have a chance to import wheat unless you have a tolling licence," the trader in Shanghai said.
IMPORT CONTROL STILL KEY
China restricts trade in commodities like wheat and corn, while soybeans are imported more freely because the country is usually short of them.
But while WTO membership would require China to knock down non-tariff barriers, Beijing might set up other hurdles to protect its hundreds of millions farmers from a flood of imports, traders said.
"The government will still have ways to control imports. For instance, it can impose stricter quarantine checks," said the trader in Shanghai.
New hurdles are being thrown up. This week, the major ports of Dalian and Chiwan beefed up quarantine regulations for imported grains, a move seen putting the brakes on some foreign crops ahead of WTO entry.
A top Chinese official told Reuters in Sydney yesterday that new quarantine rules would be announced to tie in with strict new rules on genetically modified organisms that have already brought soybean orders to a standstill.
The government would clarify GMO rules "very soon", he said. Some optimistic traders said they would be announced within a month.
But analysts say China might be shooting itself in the foot.
"If they succeed in raising soybean prices by limiting imports, this will hurt their crushing industry because the feedmills will just start buying Indian soymeal," said a Western diplomat in Beijing.
Orders for imported soybeans have been slack due to uncertainties over China's GMO rules, announced on June 6, which traders say will lead to significantly smaller arrivals as the end of the year approaches.
Soy arrivals in September fell to around 700,000-800,000 tonnes from 1.83 million tonnes in July, traders say.
JITTERS OVER SHIPMENT COST
World events also loom over the trade in China.
Last Tuesday, hijackers commandeered planes and crashed into the World Trade Center, destroying the landmark twin towers, and damaged part of the Pentagon in Washington.
"So far we haven't seen any major impact on the commodities trade with the events happening in the United States," said Dou Ming, chief executive of Beijing Orient Agribusiness Consultant.
But with the United States pledging a "war on terrorism", traders fear possible military retaliation could send oil prices and freight costs skyward.
"Shipment costs may be higher because oil prices might increase and some freight companies might hike insurance charges for security reasons," the trader in Shanghai said.