China's food exports face dumping laws.

China is becoming integrated into the global food market, but it has found that most countries are politically sensitive to rising food imports, especially from low cost suppliers. Importing nations are quite willing to use nontariff trade barriers, such as trade remedy laws, to restrict imports from emerging exporters like China. There are three distinct categories of trade remedy law: antidumping (AD), countervailing duty (CVD), and safeguards. China is a principal target of AD cases brought by food importers, especially the United States. These laws classify China as a nonmarket economy, which typically results in very steep AD tariffs.

The purpose of this article is to estimate how trade remedy laws have affected China's ability to break into the world market as a food exporter. While significant research has been conducted on the use of trade remedy laws in manufacturing, very little attention has been paid to agriculture (Blonigen 2004). We begin by summarizing trends in China's food production and exports. Then we discuss specific trade remedy cases, mainly AD cases brought against horticultural exports from China. Our conclusion is that U.S. trade remedy laws disrupt China's exports in the short term but offer limited protection to U.S. farmers.

China's Export Patterns and Acreage Shifts

Over the past twenty-five years, market liberalization has occurred in China's agriculture. As a result, production of staple grain crops declined and an expansion of horticultural and animal products expanded. But the job of liberalization is not yet complete and significant changes in production and trade patterns are expected to take place in the coming years. China is expected to become a more significant food exporter, specializing in horticultural products (Carter and Li 2005).

From 1990 to 2004, the value of China's agricultural exports grew from 10.1 to 24.1 billion USD, while at the same time imports grew from 7.9 to 42.3 billion USD. As of 2004, China accounted for about 4.1% of global agricultural trade, according to WTO international trade statistics. Japan is the top destination for China's agricultural exports, receiving about 25% of China's agricultural exports. Hong Kong is the second most important export market (13%), but the numbers for Hong Kong could be misleading because middlemen in Hong Kong handle a large share of China's foreign trade. As the main destinations for China's food exports, Japan and Hong Kong are followed by South Korea, the EU, and the United States (based on 2003 data).

China's agricultural trade growth reflects the production changes that have taken place over the last fifteen years. Grain production is competing with other crops for use of China's farmland but is losing the battle as more and more arable land is being devoted to nongrain crops that bring farmers higher returns. During the 1995-1997 to 2003-2005 time period, FAO data show that cereal grains harvested area declined from 91.6 to 79.8 million ha (13% decline), with sharp drops in rice (11%) and wheat (24%) harvested areas. At the same time, fruit and vegetable harvested areas experienced a strong expansion, rising from 8.6 to 10.2 million ha (19%), and from 11.8 to 21.7 million ha (84%), respectively. As pointed out by Huang and Gale (2006), China's expansion in vegetable acreage just since 2000 alone, exceeds the entire vegetable acreage in the United States. China now accounts for about one-third of the world's production of horticultural products. Despite the very rapid growth in fruit and vegetable production, China is only a moderate player in the world horticultural trade. FAO data indicate that China's fruit and vegetable exports currently account for about 6% of the world total.

Antidumping Cases against China

Between 2000 and 2004, China was by far the main target of global AD cases for all merchandise trade, and surprisingly, it was also the third largest user of anti-dumping legislation, behind India and the United States (WTO 2006). As shown in figure 1, AD cases initiated against Chinese exports have been steadily increasing in recent years. (1) The left axis in figure 1 reports the absolute number of AD cases initiated against China and against all countries, represented by the shaded columns. The right axis corresponds to the line graph that shows the percent of cases lodged against China relative to all countries.

[FIGURE 1 OMITTED]

According to the WTO, between 1995 and 2005, 469 AD cases were initiated against China. Of these, 338 (72%) resulted in measures imposed on Chinese exports out of a total of 1,804 worldwide. India alone instituted sixty-six measures against China. By 2005, almost 30% of all cases worldwide were targeted at China, which is exceptional because China accounts for less than 7% of world merchandise trade. The United States imposed the second largest number of AD measures against China, 50, which represented about 20% of all U.S. measures imposed over the same period. Over the ten-year period, China's export sectors most often targeted were metals, chemicals, and machinery (WTO 2006). (2)

Agricultural cases which resulted in final duties make up a very small share (4%) of the cases against China, but this is not too surprising as China's agricultural exports are only slightly more than 4% of the total value of China's merchandise exports. (3) Between 1995 and 2005 only 12 AD cases were initiated against China's agricultural exports. Fruit and vegetable products accounted for eight of these. In addition, there were two cases dealing with prepared foodstuffs and two cases that focused on fish. (4)

Despite the fact that China was the target of most of the EU's AD cases filed between 1979 and 2000, with ninety cases lodged, only one case involved food (canned pears). We note that over this time period, the EU was one of the top markets for China's agricultural exports, ranking ahead of the United States. Of Canada's thirty-six agricultural AD and CVD cases initiated since 1980, only two were against China (fresh garlic in 1996, and fresh or frozen garlic in 2000). The cases resulted in duties of 70% and 68.1% respectively, the highest AD duty rates Canada has ever imposed against agricultural imports.

The United States has been the main user of AD laws against agricultural imports from China. Between 1980 and 2005, the United States initiated eight cases against agricultural imports from China; seven of those occurred after 1994. (5) These seven cases included fresh garlic (1994), crawfish tailmeat (1997), preserved mushrooms (1998), non-frozen apple juice concentrate (1999), honey (1994 and 2000), and frozen or canned warm-water shrimp and prawns (2004).

With the exception of the 1994 honey case that resulted in a suspension agreement, all of these cases resulted in a final dumping order. As of May 2006 all six orders remained, although most have been through annual administrative and shipper reviews. These reviews often resulted in duties being lowered for some specific exporters and shippers. Indeed, for garlic, mushrooms, and apple juice, some exporters managed to have their duties lowered to zero (table 1).

Of all the U.S. AD orders currently in place against China, agricultural cases make up 10%. Note that two-thirds of the U.S. agricultural AD cases against China involve horticultural products. (6) Given the importance of horticulture in these trade disputes, the next section reviews trends in U.S. horticultural imports from China. We then discuss trade patterns for China's horticultural exports targeted by the U.S. trade remedy laws.

U.S. Horticultural Imports from China and AD Orders

There has been a surge in U.S. agricultural imports from China since around 2002, largely explained by imports of horticultural products (figure 2). The U.S. horticultural sector can be categorized into three principal areas: vegetables, nursery/greenhouse, and fruits, nuts, and berries. While growth of U.S. imports of vegetable products from China has been significant, when compared to other countries, China is not yet a main exporter to the United States, but it is a strong competitor in third markets, China is the fourth largest supplier of vegetables to the U.S. market, but only accounts for 4% of U.S. imports, behind Mexico, Canada, and Spain. As for fruit products, China is not yet a significant supplier to the U.S. market relative to other countries such as Mexico, Chile, and other South American countries (USDA 2006).

[FIGURE 2 OMITTED]

Prior to 1994, there were no U.S. AD or CVD cases against China's agricultural exports that resulted in duties. Of the six cases initiated since that time (through 2005), all were AD cases that resulted in very high import duties ranging from 51.7% to 376.7%. Four of the six targeted commodities were horticultural products, and these products were subject to import tariffs greater than 183%. Only imports of pistachios from Iran have been subject to U.S. duties of the same magnitude. To put the duties on imports from China in perspective, the average AD duty for all U.S. agricultural cases during this time period was 57%.