February 9, 2000

Tariffs

China is committing to establish a "tariff-only" import regime; all WTO-inconsistent non-tariff barriers will be eliminated. Any other measure, such as inspection, testing, and domestic taxes must be applied in a manner that is consistent with WTO rules requiring a transparent and non-discriminatory system.

While trade in soybean oil will be completely liberalized by 2006, China will use a tariff-rate quota (TRQ) system and state trading during the interim. Under this system, China will permit imports of approximately1.7 million metric tons at a duty of 9%, with the quantity growing to nearly 3.3 million metric tons by 2005. Imports over this quota will face a higher duty of 74% falling to 20% by the year 2005. In 2006, the TRQ and state-trading will be eliminated, with nothing remaining but a 9% duty for all imports of soybean oil. China made specific commitments to administer these TRQs based on economic rather than political criteria. These commitments are designed to ensure a transparent and consistent system for allocating shares of the TRQ to end-users and creating provisions to ensure that quota-holders are not impeded in utilizing their quotas. If TRQs are not utilized, they are redistributed to other non-state-trading end-users who have an interest in importing. If a TRQ share that was reserved to be imported by a state trader is not contracted for by October for any given year, it will be reallocated to non-state trading entities.

For oilseeds, China’s commitments include:

• China will bind its tariff for soybeans at the current applied rate of 3%, foreclosing its ability to establish a quota in the future. China’s imports of soybeans exceeded 3,000,000 metric tons in 1998. China will bind its tariff for soybean meal at 5%.

• China will phase out the TRQ for soybean oil by the year 2006. During implementation, the TRQ will grow from 1,718,000 metric tons to 3,261,000 metric tons, with the share reserved for importation through entities other than state trading enterprises growing from 50 percent to 90 percent before the TRQ is eliminated. The in-quota duty during that period will be 9%, while the over-quota duty will fall from 74% in the year 2000 to 9% in the year 2006.

• China will immediately eliminate quotas on cottonseed, sunflower, safflower, peanut and corn oil and replace them with a 10 percent tariff. China agreed not to charge a higher duty for any of these oils, and for soybean oil, than is charged for other vegetable oils.

Trading Rights and Distribution

• Currently, U.S. companies’ ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including oilseeds and oilseed products, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period. Under the soybean oil TRQ, 50 percent of the TRQ will be reserved for entities other than state trading enterprises initially, with this share growing to 90 percent by 2005.
  
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products. (See separate papers on distribution services and related services.)

Export Subsidies

China will eliminate export subsidies for agricultural products when it joins the WTO, benefiting U.S. agricultural products competing in third-country markets.

Domestic Support

• China committed to cap and reduce trade-distorting domestic subsidies; specific levels will be determined through multilateral negotiations.

Sanitary and Phytosanitary Measures

• China committed to fully abide by the terms of the WTO Agreement on Sanitary and Phytosanitary Measures, which requires that all animal, plant, and human health import requirements be based on sound science.

Last modified: Thursday, October 14, 2004 PM