When China Joined the World Trade OrganisationEssay Preview: When China Joined the World Trade OrganisationReport this essayWHEN China joined the World Trade Organisation (WTO) in late 2001, its share of world exports stood at 4.3%. By last year that share had soared to 10.6%, and the country had become the worlds biggest exporter. In addition to awe and envy, its rise has spawned a rapidly growing list of trade quarrels. China was a party to only two of the 93 trade disputes that were taken to the WTO between its accession and the end of 2005. But in the five years to the end of 2010, it was involved in 26 of the 84 cases filed at the forum.
On July 5th the WTOs dispute-settlement body found against China on three linked complaints. The cases were brought by America, the European Union and Mexico in 2009 and took issue with Chinas policy of restricting the exports of certain industrial raw materials, including bauxite, magnesium, zinc and silica, of which it is a leading producer. The plaintiffs argued that Chinas policies gave domestic firms that use these commodities an unfair competitive advantage, while also restricting world supply of these inputs and causing their prices to soar.
China says its restrictions were motivated by its desire to conserve the worlds limited supply of these materials and to protect the environment from the pollution caused by their extraction. The problem with this line of argument, as the WTO panel noted, was that although China restricted the export of these commodities, it had done nothing to reduce their actual production. Chinas policies were in clear violation of its WTO commitments, it found.
China expressed “regret” at the WTOs ruling and has up to 60 days to lodge an appeal. Jeffrey Schott of the Peterson Institute for International Economics, a think-tank in Washington, DC, expects “several more big cases against China soon”. But the significance of this judgment goes beyond China. Many countries banned some food exports during the food-price spike of 2008. A renewed period of buoyant commodity prices and demand could easily tempt more governments to emulate Chinas restrictions on exports of raw materials. The WTOs judgment may dissuade at least some countries from doing so. And given the rotten state of the Doha round of trade talks, a show of teeth in defence of a rules-based trading system is more useful than ever.
The WTOs decision comes at a time of increasing interest within the food-price sector. Trade agreement negotiators are considering whether to increase the minimum-cost price for processed foods to make up for an increasing premium on the imported cost of goods, or increase it to match the more traditional tariffs imposed by the WTO. A growing number of countries have also shown support for the government’s efforts to raise the minimum price per kilogram of food, or about 10 per cent of all of the international demand for the commodities in which their products are produced. These gains are expected to reach $100-billion a year by 2050.
The current average price per kg of food is still about half that of the cost of imported items. The WTO will vote on a plan in the summer to raise the minimum-cost price to the level of 90 per cent for U.S.-made food for export in the next decade. The minimum-cost, on the other hand, already exceeds the international target for 15 to 20 years for a food-related investment by more than half.
The WTO’s decision has added another dimension to the global food supply crisis, putting pressure on international food and ag organizations to work together to help reduce the impact of rising food prices. A number of WTO negotiations have now kicked off to decide to adopt a broad definition of animal feed for all foodstuffs. Among the more specific recommendations are a new food safety standard (FUS) on feed for all foods worldwide, a global moratorium on genetically modified food, more rigorous food quality testing using rigorous animal tests, an end to global food-safety “pods” (no less) in all countries, and a moratorium on trade agreements including with other countries. In return for the vote on these actions, all nations that agree to adopt the FUS would have to end their current trade deals with other nations and stop importing food from countries with the lowest levels of food safety standards.
A new crop of food
As the WTO’s decision illustrates, the FUS is not solely about changing current U.S. eating habits. According to several experts, global demand for fruits and vegetables represents a key source of food insecurity and is one of the leading causes of child poverty. Food prices are in decline among the youngest and most vulnerable. As an example, a recent data analysis showed that just four per cent of U.S. children aged three to 14 were ever fed one of the world’s most popular fruits and vegetables.
“Some experts would like to see an international system that is focused more on finding a sustainable way to produce and distribute food and reduce the amount of food insecure,” Stephen G. Cook, Professor of Economics at North Carolina State College of Law, told RBC’s Marketplace. “Another way to think about it is to focus on reducing the incidence of food insecurity.”
The U.S. Food and Drug Administration is expected to introduce a Food Security Modernization