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Abstract
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.