Chinese Farm Support Doubles, New Data Shows

19 October 2011

China's agricultural subsidies doubled between 2005 and 2008, according to new figures provided by the government to the WTO last week. However, the report classes all farm support as ‘green box' - the category for payments that are exempt from any ceiling or cuts on the grounds that they cause no more than minimal trade distortion.

This is China's third subsidy notification since its 2001 accession to the global trade body. The previous notifications were in 2010 (for calendar years 2002-2004) and 2006 (for calendar years 1999-2001).

The new data shows a dramatic increase in recent farm subsidy provision, which grew from 310 billion RMB yuan to 593 billion RMB yuan - or approximately US$85 billion - over the four year period. The growth reflects a long-term trend towards increased support for agriculture in China, all of which has been reported as green box.

According to these new figures, China made no outlays on trade-distorting subsidies in the WTO's ‘amber' or ‘blue' boxes. Blue box subsidies are production-limiting measures that are considered trade-distorting by the global trade body; amber box subsidies are the most trade-distorting form of permitted support under the WTO system.

The only trade-distorting payments provided fell below the permitted ‘de minimis' ceiling, which is equivalent to 8.5 percent of the country's value of production under a special agreement reached when China joined the global trade body in 2001. De minimis spending is a category of trade-distorting support that is currently allowed in small amounts under WTO rules - usually up to five percent of the country's value of production.

For the year 2008, China reported positive de minimis support for cotton, rice, corn, rapeseed, soybeans, and pork, although support for none of these products exceeded three percent of the value of production, and in most cases was far lower.

Instead, over half of the support provided was classed as ‘general services' payments that do not distort agricultural production or trade. This category covers research, pest and disease control, extension and advisory services, and infrastructure.

One particular sub-category of general services reported represented as much as 166 billion RMB yuan in 2008, or a little over one quarter of all subsidies notified. Described as ‘other general services', it included the operating costs of buildings and facilities, and the salaries, expenses, and pensions of agricultural agency staff.

General services subsidies for infrastructural services were also important, representing 125 billion RMB yuan or one-fifth of all spending: these covered outlays for services such as flood control engineering, draining and irrigation facilities, rural roads, and soil and water conservation.

Environmental, food security spending rises

Financial support for most measures increased over the period, with spending on environmental measures increasing by around 40 percent to reach 68 billion RMB yuan in 2008. Payments for public stockholding for food security increased by around 30 percent to reach 58 billion RMB yuan, while payments for natural disaster relief jumped five-fold to reach 55 billion RMB yuan. The subsidy increase is linked to a series of reforms that China has introduced in recent years that aim to improve farmer welfare, reduce rural-urban disparities and improve domestic demand.

However, in a notable exception to the general trend towards increased farm support, subsidies for domestic food aid fell from 99 million RMB yuan to 64 million RMB yuan over the same time.

While direct payments to farmers also nearly doubled, they still represent less than four percent of total farm support - in contrast to other WTO members such as the EU, where such payments account for a significant share of the subsidies provided to producers.

Although China is also entitled to provide agricultural input and investment subsidies under a clause providing ‘special and differential treatment' to developing countries, Beijing reported that no such payments were made.

While in absolute terms China's farm subsidies are now close to the levels provided by agricultural trading giants such as the US and the EU, on a per capita basis the country's farmers continue to receive far less than their counterparts elsewhere (see Bridges Weekly, 7 September 2011 and 26 January 2011, respectively).

With the new subsidy notification, China joins other countries such as the US, Japan, and India, which have all also recently submitted new farm support data to the WTO (see Bridges Weekly, 7 September 2011 and 15 June 2011, respectively). China and India both recently came under fire from the US for not notifying their subsidies to the global trade body on a regular basis.

More information

The full report (G/AG/N/CHN/21) is available online here.

The current RMB yuan to US$ exchange rate is: 1 RMB = US$0.157.

ICTSD reporting.

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