China’s WTO Entry May Leave Farmers in the Dust

Li Jun knows next to nothing about the World Trade Organization, but what little he’s heard doesn’t sound good.

Once China joins the trade body, the country’s agricultural markets will be pried open by international law, allowing the import of high-quality grain at low enough prices to render Li’s work as a farmer virtually obsolete.

“I can’t compete with that,” the 33-year-old peasant said with a shake of his head. “If no one wants our grain, then we’ll eat it ourselves and raise pigs and chickens instead. . . . Or I’ll go to Beijing to be a day laborer.”

As U.S. and Chinese officials speak enthusiastically about the benefits that Beijing’s entry to the WTO is expected to bring, the plight of Li and millions of peasants like him has become little more than a forgotten footnote amid the back-slapping rhetoric.

While urban Chinese consumers and foreign agribusiness interests stand to gain from freer markets, many of the poorest of the poor in China--rural residents who scrape by on less than $500 a year--may find themselves squeezed even further or thrown out of work under the WTO concessions agreed to by Beijing and Washington in November.

They are people like Li, who uses his tractor as a village shuttle service here to earn enough money to buy meat. Or neighbor Ran Youzhen, who depends on her son to send her $200 a year from his electrician’s job in the city. “We wouldn’t have enough to eat if my son stayed with us,” she said. Or Ji Shulian, who is still paying off the loan he took out to give his youngest son a proper wedding.

They are, in fact, the very peasantry who helped the Communists ride to power 50 years ago--and now are increasingly being left behind in the government’s economic reform program.

China already is wrestling with a widening gap between rich and poor in what was once supposed to be a classless society. Residents in prosperous eastern coastal cities such as Shanghai can earn as much as six times more than their counterparts in interior areas such as rural Gansu province.

Once China has joined the WTO, a step that awaits completion of negotiations with members of the European Union and a few other industrialized countries, some economists fear that income levels across the nation will be further polarized.

Urban entrepreneurs will flourish, analysts say, but farmers whose products are undercut by cheaper imports will be reduced to subsistence levels, unable to earn the extra money needed for school fees, medical care or farm “inputs”--supplies such as fertilizer--that could make their crops more competitive.

“It will just further consolidate the pre-industrial peasantry,” said Thomas Chan, head of the China Business Center at Hong Kong Polytechnic University. “They won’t have a good chance to buy the inputs to upgrade agricultural production. They can’t improve themselves in the market sense.”

Exactly how many of China’s 700 million farmers will be adversely affected by China’s membership in the WTO is difficult to predict.

A study by the State Council, or Cabinet, calculated that as many as 10 million peasants--equivalent to about one-third the population of California--will lose their livelihoods. Total annual earnings by farmers across the country are expected to plummet by as much as $660 million.

Some peasants thrown out of work could be absorbed into other industries, such as textiles, which will probably receive a boost from China’s entry into the organization, which sets the rules governing international trade.

But many farmers will simply swell the ranks of China’s migrant worker population, already at the saturation point with 100 million people who have swarmed into big cities such as Beijing and Shanghai in search of employment.

The Communist regime, which has downplayed the risks of WTO membership, is worried about the possibility of increased unrest in the vast countryside. Small-scale protests over rampant corruption and high taxes already are commonplace in rural areas.

Indeed, the potential for added social turbulence made agriculture one of the biggest sticking points through years of contentious trade negotiations between China and the U.S., said David Zweig, an expert on Chinese rural reform at Hong Kong University of Science and Technology.

Long Yongtu, China’s chief WTO negotiator, admitted in 1998 “that agriculture was about the most difficult sector for him,” Zweig said, “because old party cadres would go in and tell [President] Jiang Zemin that they would have total unrest in the countryside if they opened up agriculture [to world markets]. So there’s the perception in China that this will open up disaster.”

The dilemma is in many ways a byproduct of the government’s own agricultural policies, which have always been driven by political and ideological, rather than market, concerns.

To maintain China’s self-sufficiency and raise rural living standards, the government buys the bulk of domestic farmers’ grain at fixed prices that are between 10% and 70% above world market levels. In the northeastern province of Jilin, for example, corn recently sold at $85 a ton, $9 more than the U.S. price at the time.

Farmers therefore have had little incentive to improve their crops or switch to other products. Millions of tons of state-bought grain, much of it of poor quality, sit rotting in storehouses around the country.

The U.S. Department of Agriculture estimated that the Chinese government lost $1.8 billion a month in 1997 because of its inefficient grain policies and distribution systems.

Domestic surpluses and tariffs as high as 114% have effectively kept out foreign competition. Last year, China imported about 200,000 tons of wheat and about 55,000 tons of corn from the U.S.

Under the Sino-U.S. WTO accord, however, China’s quota for low-tariff wheat imports from other nations will rise to about 8 million tons, and again to 10.6 million after four years. The quota for corn will start at 4.9 million tons, eventually increasing to 7.9 million.

While few experts expect the government to begin importing such quantities immediately, even letting in a portion of the quota could pinch local farmers as prices drop.

“In the short term, lower prices will certainly cause some difficulties for Chinese farmers,” said one Beijing-based analyst who asked not to be identified. “There are so many farmers that [the government] doesn’t have the resources to support farmers the way that Japan or the EU does.”

Residents here in Laishui know that all too well.

As one of the central government’s officially designated poor counties, Laishui is entitled to extra help from the state. Yet inhabitants in this chilly corner of Hebei province in northern China say they have yet to see any of it, echoing a recurring complaint across the nation that local officials siphon off public funds for private use.

“We couldn’t get any because we’re ordinary farmers with neither power nor official connections,” said resident Wang Xiaozheng.

Wang, 55, supplements her household income by raising pigs and sheep. All told, Wang and her husband earn about $650 a year. They live in a simple farmhouse with no heat, their breath hanging in the air as they talk.

The two spend money when they have it and endure when they don’t--a common attitude among Laishui’s residents, whose fortunes have ridden a roller coaster through five decades of Communist rule.

Their lives improved dramatically after China dismantled its communes in the late 1970s, permitting peasants to till their own plots and opening the nation to the outside world.

“Big changes took place in the beginning years of the opening-up policy,” said Li, the man who hires out his tractor as a shuttle. But “things have remained static in recent years.”

Unfortunately, some farmers foresee longer periods of hardship if foreign companies flock to China and start underselling them.

One firm hoping to reap dividends from the WTO agreement is American agribusiness giant Cargill Inc., the largest privately held company in the U.S., which has invested more than $50 million in China in feed and fertilizer plants.

J. Norwell Coquillard, head of Cargill’s China and Korea operations, said he does not expect an immediate spike in grain exports out of the U.S. The benefits will come in the long term as Beijing adapts to the idea of importing grain and working with private traders.

“We’ve been trying to encourage them, saying, ‘You ought to import 5% to 10% of your [consumption] needs. It’s a lot more efficient use of resources,’ ” Coquillard said in an interview in his Shanghai office.

By depending more on imported grain, economists contend, China can refocus its agriculture on cash crops such as fruit and vegetables, which would raise rural incomes.

So the theory goes. Practice is another matter.

“We’re not capable of doing that, since we don’t have either enough money or technology,” said Wang. “And we know nothing about [field] management. Almost all the farmers here plant wheat and corn, like us.”

Switching to higher-quality grains or better-value crops takes time, said Chan of Hong Kong Polytechnic University.

It also takes a change of mind-set among farmers whose families, for generations, have planted some type of grain for their own consumption. Weaning peasants from their traditional reliance on grain will be difficult--even with the WTO looming ahead.

“It cannot break the historical backwardness” of Chinese farming, Chan said. “Maybe in the future the Chinese people or China’s government will find some way. But given the present situation, it won’t be easy.”