U.S., China at Impasse Over Genetically Modified Crops
The first major trade spat since China joined the World Trade Organization heated up this week after U.S. officials failed to resolve a dispute over new Chinese regulations on imports of genetically modified crops that could trigger the loss of billions of dollars in U.S. sales.
U.S. farmers fear China is building a new wall of protectionist hurdles to foreign goods now that it is being forced to lower tariffs and open its market as a member of the Geneva-based WTO. China’s farm industry, which supports two-thirds of the population, is wary of foreign competition.
The two countries are feuding over Chinese rules that take effect March 20 requiring imported crops and food ingredients to be certified safe by the Chinese government. U.S. officials said the Chinese have not yet spelled out what is “safe” and the U.S. wants assurance that the rules will not halt the import of genetically modified crops or food products.
“China has not presented any science to support these regulations,” U.S. Trade Representative Robert B. Zoellick and U.S. Agriculture Secretary Ann M. Veneman said in a joint statement. “The result could be a halt in exports of farm products. That is an unacceptable situation.”
Soybean producers, which exported $1 billion worth of their crop to China last year, are particularly vulnerable to the Chinese regulations because more than 70% of U.S. soybeans are genetically modified. They worry that Chinese buyers concerned about the uncertainty over the new regulations will choose domestic suppliers or turn to Brazil, a major soybean producer that has a ban on genetically modified seeds. U.S. corn and cotton exporters also could be hurt.
Bob Callanan, a spokesman for the St. Louis-based American Soybean Assn., believes the Chinese are uncomfortable with their increasing dependence on foreign-grown soybeans and want to slow imports so their farmers can become more competitive.
“This is just a way to create a temporary trade barrier,” he said.
The United States is particularly unhappy because the Chinese assured President Bush last fall that they would accept U.S. government safety certifications for agricultural products, Callanan said. But in a meeting this week in Beijing, the Chinese stuck to their requirement that products receive Chinese approval, a process that could take months.
Disappointed U.S. officials had hoped to resolve the issue before Bush visits Beijing on Feb. 21.
U.S. soybean farmers, anxious about keeping their largest foreign customer happy, hope the matter can be resolved through negotiations and that the U.S. will not be forced to file a WTO complaint.
“We don’t feel that [a complaint] would be in the best interest of our growing relationship with the Chinese,” Callanan said. “We would rather convince them this is the right thing to do before it gets to that point.”
Nicholas Lardy, author of the newly published book “Integrating China Into the Global Economy,” said China’s action is not surprising but may not be a violation of WTO rules. He pointed out that Europe imposed a moratorium last year on imports of new varieties of genetically modified organisms, prompting a threat of a WTO complaint from the U.S. The handling of these GMOs is a hot topic in the newly launched global trade talks that began last fall in Qatar.
“I think Chinese protectionists may be taking a leaf out of the European playbook,” said Lardy, a Brookings Institution scholar. “But what they’re doing isn’t even as egregious as what the Europeans are doing.”
William Abnett, a Seattle-based China consultant, predicts the issue will be a difficult one to resolve given the history of disputes over a variety of health-related measures, including China’s ban on U.S. wood packaging, fresh potatoes, avocados and peaches.
“I hope that [U.S] negotiators can work this out, but agriculture issues are among the most controversial of all trade policies to compromise on,” he said.
