This analysis examines the implications of WTO accession for China’s domestic policies and institutions by identifying some of Chinese agricultural policies and institutional arrangements that may generate conflicts with WTO requirements and analyzing the nature and extent of the conflict that may be introduced by WTO accession. We differentiate three alternative ways that China’s current domestic policy or institutions may conflict with or be incompatible with WTO accession: (1) the domestic policy or institution is expressly prohibited by WTO rules and principles; (2) the changes required by WTO accession impose additional costs on the government such that the existing policy or institutions are difficult to sustain; and (3) the changes required for WTO accession reduce the effectiveness of the policies or institutions. Based only on the incomplete information currently available on China’s WTO commitments, we suggest that the greatest conflicts center on China’s policies that manage agricultural supply, distribution, and trade of major commodities. First, China’s state trading enterprises will no longer have a monopoly on trade. This is likely to reduce the government’s ability to use STE as a policy instrument to limit imports in order to support domestic production. Second, the most important conflict with China’s WTO commitment is likely to be China’s use of a state-run monopoly procurement system for grains and cotton. This change will diminish the government’s current policy goal of managing supply and distribution of key agricultural commodities. The impact on farmers, however, is likely to be mixed and will be influenced by general agricultural supply and demand conditions. Third, the change in China’s import tariff duties is not expected to have a significant impact on either domestic policy or on government revenues. However, in terms of domestic support, China will face a conflict in the operation of its grain stockholding policy, while the large number of government programs that meet the WTO “Green Box” criteria will be increasingly important to China’s agriculture. In this way, China’s farmers will hopefully be able to reduce costs, increase yields, and improve their competitiveness.

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TMD Discussion Paper 68

 Record created 2017-04-01, last modified 2018-01-22

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