Date Released: 
04/08/2005

Global trade liberalisation has presented opportunities for developing countries and emerging economies, with China a leading example. Ensuring smallholder farmers and the rural poor, most of who live in western China, receive benefits similar to those in the country’s east is the subject of ACIAR research

More than 70 per cent of China’s rural poor live in the country’s western provinces. Many of these people are smallholder farmers working to supply food for their own needs. The possibility of selling extra production to markets, including those of eastern China, to meet growing demand, is an avenue to a better life.

This demand reflects the emergence of China as a global economy. Since December 2001 China has been a member of the World Trade Organization. WTO accession brings with it rules to help free up global trade and with these rules come change.

Many benefit the overall economy; others necessitate new internal policies and have implications for market access, both for internal and external markets.

Such changes do not always bring benefits equally, just as a growing economy does not always distribute benefits and income equitably, but are reducing poverty.

The growth of the Chinese economy has been most obvious in the country’s east. But in the poorer western provinces the transition to a market economy and WTO accession has not brought the same benefits.

Western China is the subject of Chinese Government development policies along with associated policies for food security. WTO accession has resulted in a need to review and update these policies.

ACIAR has supported this work through projects to help gather and interpret data and policy ramifications relating to trade liberalisation and development policies.

The Chinese Government has pursued a policy of food security for many years, including meeting domestic demand through it’s the grains sector. Food security has been a factor helping underpin recent economic growth. Another factor has been increased economic integration with the global economy. WTO accession has resulted in the deeper integration of the Chinese economy into world markets.

Food security and increased efficiency of agricultural production are strongly related. Increased agricultural production is a key strategy for reducing poverty of smallholder farmers. The difficulty for those in western China engaged in agriculture is a lack of comparative advantage, both against other regions and especially global producers.

Agricultural sectors without a comparative advantage are the most vulnerable to changes. WTO rules are designed to promote more open trade, making inefficient producers that face increased competition, both within and outside China, more vulnerable.

The implications of WTO accession on five agricultural and 39 non-agricultural sectors, across three regions: eastern, central and western have been assessed, including the regional disparity of expected benefits. This revealed a worsening of the income disparity between the wealthier eastern and poorer western regions. If left unaddressed, rural households in western China will suffer the worst effects of China’s WTO accession.

Understanding the implications of WTO accession and the effects if left unaddressed has provided a baseline against which questions relating to policy impacts can be compared.

Simulations on possible Government policy interventions to maintain grain self-sufficiency have revealed the best options.

China’s policies to ensure food security will need to adapt to these realities if its agricultural sector is to maintain competitiveness.

WTO accession is likely to increase incomes only where a comparative advantage is tied to market reforms.

For the Chinese Government the challenge is developing policy options that promote growth while buffering poor smallholders from negative impacts of WTO accession and policy reform.

Past research has shown the value of public investment, both in agricultural growth and poverty alleviation.

The key for western China is the effective utilisation of these investments and associated policies to create opportunities for smallholders to gain through WTO.

The implications of policy issues are also being examined at the regional, village and household levels.

A series of policy option papers, in Chinese, to advise a range of policy makers have been developed.

Smallholder farmers in western China can benefit with appropriate policy interventions, both in the short-term transition to WTO compliance and in the longer-term as markets open up.

ACIAR is working to equip Chinese policy makers with information to examine the full range of policy options, for the most effective means of helping smallholders access the benefits of WTO accession.

Given the size of the Chinese economy and population this would make a real difference in a number of lives, as the benefits flow equitably from east to west.

Trade implications beyond China

ACIAR research is also examining a range of issues relating to:

  • a comparison of international food consumption patterns has identified consumption regularities and compared these to Chinese and Indian patterns
  • sanitary and phytosanitary regulations and their implications for (agricultural exporting) developing countries to achieve the full benefits of trade liberalisation
  • agricultural policies and levels of protection or non-protection for selected developing countries and how these can be improved
  • the socio-economic effects of technology development to identify factors for equitable growth in agricultural industries in developing countries
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