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Economic analysis of technical barriers limiting agricultural trade of China
Project ID
ADP/2004/044
Project Country
Commissioned Organisation
International Food Policy Research Institute, USA
Project Leader
Dr David Orden
d.orden@cgiar.org
Phone:
1 202 862 8160
Fax:
1 202 467 4439
Project Budget
$175,921.00
Start Date
01/07/2005
Finish Date
31/12/2006
Extension Start Date
01/01/2007
Extension Finish Date
31/12/2007
ACIAR Research Program Manager
Dr Simon Hearn
Related publications
Overview Objectives
The first objective was to identify technical barriers for which strategies can be developed to expand trade opportunities. The second component was to provide in-depth analysis, integrating risk-assessment and economic information necessary to make effective arguments for modification or elimination of selected barriers.
Project Background and Objectives
It is widely recognised that rising sanitary and phytosanitary (SPS) standards have created numerous obstacles to the international exchange of agricultural commodities. The issue is of particular importance for developing countries as they seek to exploit their comparative advantage and expand their exports of labour-intensive, high-value-added agricultural products to the more lucrative developed-country markets. Agricultural exporters in developing countries are often required to meet stringent developed-country SPS standards. Not only are these standards much higher than international standards and those prevailing in developing countries, but they are also subject to frequent upward revisions.
China is a large agricultural producer and exporter. As China's agricultural trade continues to increase, the country has experienced more challenges in meeting the SPS standards set by its trade partners. While many of the SPS standards are legitimate and necessary for protecting human, animal, and plant health, others are considered to be disguised forms of protection. Concern in China has grown that technical regulations such as the SPS standards are increasingly being used to discriminate against some of its exports. The European Union (EU), Japan, and the United States are the three markets in which China has the highest stakes but also encountered the most SPS barriers.
Legitimate and necessary standards of importing countries need to be met by exporters. Moreover, because of the difficulty of challenging questionable foreign SPS barriers, it is often considered more practical to meet these foreign standards. To this end, China has enacted many laws and regulations on food and agricultural production. Despite efforts, many problems still exist in China's food safety regulatory system that need to be resolved.
Progress Reports (Year 1, 2, 3 etc)
Year 1:
During the first 12 months of the project, progress has been made in four dimensions. First, field research has been initiated to compile an inventory of technical barriers facing agricultural exports from China that may be alleviated by changes of regulations or by adoption by exporting firms of new technologies or compliance procedures. Second, the basic methodology proposed for the study has been specified conceptually as an economic model, converted into computer programs for empirical analysis, and an analysis related to those to be undertaken in the project for specific cases of Chinese exports has been completed. Third, an assessment of the impacts of existing and potential North American SPS regulations on the importation of fresh apples from China has been initiated. A background literature review was prepared and an investigation made of the phytosanitary regulations for exporting fresh apples from China to Canada. Fourth, the basic methodology and related empirical application has been presented at several international conferences and related papers.
Year 2:
Issue of the safety of products exported by China has been much in the international news during the past year, demonstrating the value of careful analytic work addressing these issues. During the second 12 months of the project, progress has been made in four dimensions. First, a preliminary report was completed to provide an initial inventory of technical barriers facing agricultural exports from China that may be alleviated by changes of regulations or by adoption by exporting firms of new technologies or compliance procedures, and to describe the food regulatory systems of China. A second round of two weeks of field research was also undertaken to further develop this report. Second, additional work was undertaken in which the basic methodology proposed for the study was specified conceptually as an economic model and an analysis completed related to those to be undertaken in the project for specific cases of Chinese exports. Third, analysis was initiated to assess the impacts of existing and potential North American SPS regulations on the importation of fresh apples from China. Expanding apple export opportunities has been a high priority of Chinese agricultural trade authorities. The background literature review on apple trade initiated in year 1 was further developed. The history of recent regulatory decisions concerning apple and pear exports from China, and subsequent trade, was reviewed and analysed with a focus on the United States, Canada and Australia. Field research was undertaken to further understand the export requirements and procedures for Chinese apples to various countries. Fourth, several papers presenting the basic methodology and related empirical application have been presented at international conferences and finalized for publication.
Project Outcomes
An inventory was compiled, describing the technical barriers facing agricultural exports from China that may be alleviated by changes of regulations or by adoption by exporting firms of new technologies or compliance procedures, and also outlining the food regulatory systems of China. The basic methodology proposed for the study was specified conceptually as an economic model and an analysis completed for specific cases of Chinese exports.
The research team found that domestic food regulations were usually not consistent with or less restrictive than standards in developed-country export markets. Second, there was little coordination among the various government ministries and agencies when they establish agricultural standards and food safety controls. Third, there was a lack of technical, institutional, and managerial capacity to control and ensure compliance, thus making the regulations and standards ineffective. Small-scale production, aggravating environmental conditions and pervasive rent-seeking activities among Chinese bureaucrats all added significantly to the current food and product safety problems.
An analysis was initiated to assess the impacts of existing and potential North American SPS regulations on the importation of fresh apples from China. Expanding apple export opportunities has been a high priority of Chinese agricultural trade authorities. The history of recent regulatory decisions concerning apple and pear exports from China, and subsequent trade, was reviewed and analysed with a focus on the United States, Canada and Australia. Field research was undertaken to further understand the export requirements and procedures for Chinese apples to various countries. Several papers presenting the basic methodology and related empirical application were presented at international conferences and finalised for publication.
The team recommended that capacity-building in both the public and the private sectors would help China move toward better food safety status and create more trade opportunities. The private sector, including the farm sector, has the main responsibility for producing and selling safe food. Attracting more foreign direct investment (FDI) and establishing Hazard Analysis and Critical Control Point (HACCP) systems and coordinated supply chain management in agriculture should be the main focus. The government, however, sets the framework within which the private sector operates, thus the role of the public sector in organising public services and in promoting and monitoring food safety should be emphasised.
Location
There are no project locations defined for this project.
