Purdue News
Purdue News
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May 12, 2000 China's entry into WTO good for Indiana farmersWEST LAFAYETTE, Ind. – Hoosier farmers stand to gain an average of more than $70 million a year over the next 10 years if China is admitted into the World Trade Organization, said Philip Paarlberg, a Purdue University associate professor of agricultural economics. "We would be looking for exports to increase in soybeans – particularly soybean oil – and corn, and we have some expectations for increased sales of pork," Paarlberg said. "This is a positive for Indiana agriculture." Paarlberg estimates a 2 percent bump in Indiana farm income if China joins the WTO. That translates into an additional $3-$4 in cash receipts per acre, he said. Paarlberg based his estimate on an analysis of a U.S. Department of Agriculture report on China and the WTO. The House of Representatives is expected to vote during the week of May 22 on permanent normal trade relations with China, in anticipation of the next round of WTO talks. The Senate is expected to vote on the issue in June. Last November, the United States and China signed a bilateral trade agreement designed to break down barriers to agricultural trade. The agreement – to be phased in through 2005 – was an important step in the United States supporting China's entry into the WTO. Under existing trade policies, American commodities exported to China face stringent import barriers that change from year to year. The U.S.-China agreement establishes tariff-rate quotas, expands quota limits and allows more imports by private traders. Getting China to trade on an even playing field is vital to opening new markets for U.S. agricultural products, Paarlberg said. WTO rules would bring China more in line with market economy trading practices such as those of the United States and its major trading partners, and away from China's traditional government-controlled system, which is detrimental to American interests. "Getting the WTO agreement signed builds a framework where Chinese action becomes more predictable, with acceptable trading rules," Paarlberg said. U.S. agricultural exports to China totaled $1.1 billion in fiscal 1999, according to the USDA. The Agriculture Department predicts that greater accessibility to Chinese markets would boost U.S. exports of grains, oilseeds and other commodities by $1.6 billion within five years. Hoosier commodities exports alone could grow by tens of millions of dollars, Paarlberg said. Paarlberg's calculations show a $57.8 million jump in Indiana crop cash receipts for the year 2005, to $3.763 billion. Hoosier livestock producers could expect receipts in 2005 to climb $27.9 million, to $2.145 billion. On average, Indiana crop receipts would increase $48.1 million and livestock receipts would increase $24.5 million each year from 2000-2009 if China gained WTO membership, Paarlberg said. The numbers could fluctuate year to year, depending on China's crop yields and livestock production. Paarlberg said he considers the estimated trade increases to be reasonable, despite China's generally low standard of living. "China has a huge trade surplus with the U.S.," he said. "Every time you go to the store and pick up something that says, 'Made in China,' they get a part of the cost of that item." Also, with a nation of 1.4 billion people, even small increases in food consumption would pay big dividends for U.S. farmers. "If the average Chinese increases his meat consumption by just a kilo a year, which is about 2.2 pounds, that's a pretty substantial increase," Paarlberg said. Indiana's share of the Chinese trade pie could be larger than estimated. Paarlberg said the USDA's report used figures that some experts and China-WTO advocates believe are conservative. Although the data sound promising, Paarlberg said his findings should not be viewed as a panacea for low commodity prices. "These are relatively modest increases," he said. "If you're looking for this to boost corn prices by 50 cents a bushel, I think that's overly optimistic. But it's the combination of these little changes in the aggregate that makes the difference." Source: Philip Paarlberg, (765) 494-4251; paarlberg@agecon.purdue.edu Writer: Steve Leer, (765) 494-8415; sleer@aes.purdue.edu Purdue News Service: (765) 494-2096; purduenews@purdue.edu Related Web site:
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