Alongside the OECD-FAO report ‘Agricultural Outlook 2013-2022’, the OECD and FAO have published ‘Focus on China’, highlighting China’s growing role in international trade in food and agricultural products. It notes that rice and wheat production is a growing policy focus, given food security concerns. The analysis points out that, following agricultural and rural reforms, China’s “agricultural output grew 4.5 times over the 1978-2011 period”. This growth is expected to slow in the coming decade as “increasing resource and rural labour constraints” are faced. Food price inflation has already become apparent, according to the OECD-FAO review. However, higher incomes and increased food availability have improved food security in China, “with the number of undernourished falling by almost 100 million since 1990, despite [China] adding an additional 200 million people to its population”.
The report notes that “from 2001 to 2012, China’s agricultural trade (imports and exports) increased from US$27.9 billion to US$155.7 billion…, with China’s net trade deficit in agriculture and food standing at US$31 billion in 2012.” This trade deficit in food and agricultural products is forecast to continue to grow, as consumption growth will outpace production growth by 0.3% per annum in the coming 10 years.
At the sector level, “China’s imports of oilseed are expected to rise by 40% over the 2013-22 period,” coming to account for 59% of global trade. The Chinese meat and dairy sectors “will continue to expand, with increasing feed requirements which will result in higher imports of coarse grains” – and these import requirements will be in excess of current import quotas. With Chinese milk production projected to grow more slowly than consumption growth, Chinese dairy imports are projected to rise by 20%, “with skimmed and whole milk powder accounting for 82% of total dairy imports”.
Chinese sugar imports are projected to “stay above the tariff-rate quota [TRQ] level over the projection period”.
The area under cotton in China is expected to decline by 21% as cotton usage falls in response to increased competition in textiles from India and other lower wage economies. This is a major reversal of the trend over the last decade.
As noted in the OECD-FAO summary of the ‘Agricultural Outlook 2013-2022’ report, key uncertainties remain in terms of the outlook for Chinese agricultural trade: these relate to the sustainability of current growth rates and the impact of climate change.
With import demand exceeding the Chinese TRQ established for sugar imports, there would appear to be scope for China extending trade preferences for sugar imports to ACP countries. EU corporate actors with major production interests in Southern Africa already have established partnership arrangements with Chinese sugar companies, potentially providing a ready route to market for exports under any preferential trade arrangements with China. This could even bring benefits to Fiji, for which transport links to the Chinese market are potentially less expensive than those to traditional European markets. It could even bring benefits to Jamaica, where Chinese companies are now solidly established in the sugar sector.
There would also appear to be scope for expanding duty-free, quota-free access for ACP cotton exports (see Agritrade article ‘ Priority areas for cotton lobbying identified’, 29 July 2013). While Chinese demand for cotton is projected to decline considerably over time, if ACP suppliers can establish themselves as an integral part of the supply equation on the back of tariff preferences, they may be able to maintain their place in the Chinese market as Chinese demand shrinks, given the relatively low export volumes involved.
Expanding feed demand could potentially open up new opportunities for coarse grain and oil crop exports. Indeed, given rising per capita income, opportunities could even arise for ACP beef producers.
However, a number of key issues need to be borne in mind. The first of these is the centrality of securing sanitary and phytosanitary (SPS) approval from the Chinese authorities before food and agricultural exports can commence. ACP countries have varied experience in this regard, with considerable potential existing for a pan-ACP sector-based programme on the most effective methods for securing SPS approvals and most cost-effective mechanisms for ensuring compliance with Chinese SPS requirements.
The second issue relates to ensuring that more remunerative prices can be obtained for exports to China. There are no benefits to be gained from reorienting exports to lower-priced markets. This is a particular challenge for quality-differentiated food and agricultural exports.
Third, there is a need to ensure that the routes to market bring additional benefits to ACP producers and that these benefits are not monopolised by non-ACP companies involved in the trade.
A fourth issue relates to how to ensure that new trading opportunities with China contribute to the structural transformation of ACP engagement with global supply chains. This is by no means automatic. South Africa’s rapid expansion of exports to China has simply replicated, in exaggerated form, the primary-commodity-dependent export profile that characterised South Africa’s earlier trade relationship with the EU and USA (see Agritrade article ‘ China’s growing role in African trade’, 13 May 2012). A key challenge facing ACP countries is developing strategies to move beyond this commodity trap. Here, again, there would appear to be scope for sharing ACP experiences.