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The emergence of China as one of the world's largest potential markets has become the focus of increasing attention for economists, marketers and politicians. Reflecting anticipations of China's expected role as the world's future largest market for food, this paper focuses on identification of opportunities and constraints to Alberta's expansion of agricultural-based exports to China. The analysis is based on: collection and assessment of data relating to China's importation of these agri-food products during the five year period from 2001 to 2005; analysis based on export values and market shares of Alberta and major competitors; overviews of some relevant literature; and insights from interviews with a small number of selected knowledgeable North American exporters. Despite volatility in the values of individual products exported from Alberta to China, Alberta's total agriculture exports to China reached US$291.714 million in 2005, representing an increase of 198.75% in the five year period from 2001. During this period, China's aggregate imports of these products increased by 49.81% to US$4,196.946 million and Alberta's market share in the aggregate of agricultural and food products it exports to China grew from 3.485% to 6.951%. Thus Alberta's agricultural export performance can be broadly assessed to have improved during the five-year period under consideration.. Alberta's (average) market shares of China's imports approached or exceeded 5 percent for cereals in aggregate (6.7% market share on average for 2001-2005) and all hides and skins (4% during this study period). Despite longstanding dominance of these traditional commodities in Alberta's exports to China, Alberta's market shares of major commodity exports tended to be very variable (wheat) or have declined (hides). However, export values and market shares for canola seed (intended for processing) and barley have tended to increase and this is also the case for several semi-processed agricultural products (malt; canola oil) and processed food exports to China (frozen prepared potatoes). Exports of these particular semi-processed products are growing appreciably, although from small bases, and had achieved appreciable market shares by 2005. Successful market access, growth in market share, and potential for increased exports also applies for pork, some bovine products and related animal byproducts. Natural health products, like antler velvet, have varied but appear to have considerable potential. A number of potential 'import gaps' are identified. These are products for which China's imports have grown significantly, but appreciable Alberta exports have not been achieved, although growth appear to be feasible. Identified import gaps include bovine tongues which, together with other bovine products, are currently adversely affected by incidents of BSE in Alberta/Canada. Other products for which there are potential 'import gaps' that should be accessible to Alberta exporters are potato starch, fescue seed, live swine for breeding, and animal fats. Upon China's accession to membership in the World Trade Organization there were very considerable changes in the levels and structure of tariffs for many agricultural imports. Tariff levels were considerably reduced and the practice of staggered (i.e. increased) levels of tariffs along value chains, which had appreciably Western Centre for Economic Research University of Alberta March 2007 Page 1 increased the effective rate of protection of China's domestic food processing industries, to the considerable disadvantage of exporters, was reduced. Nonetheless there are several concerns about China's tariffs for agricultural products of interest to Alberta/Canada. China's 2006 tariffs are observed to be as high as 65% for an important category of commodity exports from Alberta (wheat); to be appreciably higher for the processed forms, rather than the commodity form, for another significant commodity export (malt with a tariff rate of 10%, relative to barley at 3%); and to be higher for an important Alberta export than for substitute products from competitors (canola imported for processing at 9% compared to soybeans, which is a major oil seed competitor, at 3%). A potential disadvantage to Alberta exporters arises from the slow pace and discouraging results of WTO trade negotiations for agricultural products. This has, moreover, encouraged a number of competing exporting nations (including Australia, Brazil, Argentina and New Zealand) to seek trade alliances with China, raising concern regarding potential trade displacement for others, including Canada/Alberta. Other disadvantages to Alberta exports arise from the ways in which food standards are applied in China and a lack of protection of product identity that is associated with fraudulent claims of branded high quality product in instances where lower quality or domestic product has been fraudulently substituted. Encouragement of China's effective participation in the Codex Alimentarius system of food standards could assist with some issues of standards anomalies. Exporters' efforts to develop and maintain close associations in supply value chains are also necessary in the China market if quality maintenance and accurate identification of products and their origins are to be achieved and defended. While appreciating the contributions of government facilitators and the commodity trade associations to promote exports to China, industry spokesmen indicate that the sheer size of the resources applied to these activities by the United States in particular provides American exporters with a relative advantage. This suggests that export promotion assistance may well be an issue that should be raised in multilateral trade negotiations. Industry informants should be helpful in future delineation of the scope of this issue. Overall, trends in consumption and the tendency for westernization of Chinese diets suggest a potential in the China import market in processed and convenience-focused food and beverage products, health foods and snacks, organic foods, and meat, fish and seafood. As indicated by the rapid increase in Alberta's exports of frozen processed potatoes, this potential can be achieved by Alberta producers and exporters.


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