The entry of China into the WTO has a dramatic impact on the country's estimated 800 million farmers. About two-thirds of China's population lives in rural areas but agricultural output only makes up 16 percent of the Gross Domestic Product (GDP) and 4.9 percent of exports. The Chinese Government formally disclosed the detailed rules on new tariff quotas for agricultural imports, which follows the commitment made by Beijing to the WTO.

The Chinese Government reduced the average import duty to 17.5 percent by 2004 and to 15.6 percent by 2005 from the average of 21.3 percent before 2003. China has pledged to use a tariff-rate quota (TRQ) system, instead of the original quota administration system for sensitive products such as wheat, corn, rice, edible oil and sugar. China has also pledged to cancel export subsidies, keep its subsidy rate for farming at 8.5 percent and abide by the WTO agreement on Sanitary and Phytosanitory Measures (SPS).

The agricultural imports covered by the tariff quota limit will enjoy a favorable tariff of less than 10 per cent. If an excess amount, more than the quota were to be imported, it would attract a tariff of around 70 percent.

While integrating into the liberalization process of the global farm produce trade, Chinese agriculture is being exposed to immense risks and challenges by removing trade barriers and opening up the domestic market. This is likely to bring about a rise in unemployment, especially in the rural areas and increased income disparities between regions that have fared well in the reform period as opposed to the interior regions, (especially the western provinces) that have lagged behind. Currently, the administration of the production, distribution, and trading of farm products is divided among agricultural, domestic trade and foreign trade departments. Such an administrative system, obviously, cannot adapt to the new situation following WTO entry.

It is reported that the domestic prices of wheat, soybeans, corn, cotton, edible oil and oil crops, and sugar are 10 to 70 percent higher than in the international market. Once foreign farm products flood China, it will result to an even slower growth of income and rising unemployment rate for farmers, whose income heavily relies on agricultural products such as grain, cotton, oil and sugar. Although the prices of meat, vegetables, fruit and seafood products are estimated to be 40 to 80 percent lower than those in the international market, they have difficulties meeting the requirements of variety, appearance, taste, freshness and processing for such products in the international market.

There are various factors that inhibit China's agriculture sector. To start with, the low productivity levels could cost Chinese farmers competitiveness in the global market. Once China opens the door to cost-effective American farm products, a vast number of domestic farmers will suffer and may lose their jobs and livelihood. The domestic market is already on a downward path given that the price index of farm products declined from 1996 to 2004. It is reported that the index has dropped by 22.6 percent in the last five years, eating into more than 300 billion yuan ($ 36.2 billion) of farmers' profits. The Ministry of Agriculture concedes that the decrease in arable land and the slide in the grain price are the main reasons why the farmers are making losses. Despite the continuous price falls, prices of Chinese farming exports are still 20 to 40 percent higher than the average standard in the international market.

In 2004, farming took up 70 to 80 percent of the per capita income of farmers in the western provinces, compared to a 50 percent average for the rest of the country. The relatively backward economy of these regions offers limited opportunities for farmers to find jobs outside agriculture — unlike those in the prosperous coastal areas who have benefited most from the economic reforms initiated since 1978. The poor infrastructure and transport conditions also add to the costs of farmers in the western regions.

In the face of rising subsidies and increasing dumping, import restrictions and countervailing duties are a survival right. The WTO has robbed countries of this right through Article 4 and now, would like to rob them even of temporary safeguards by proposing to eliminate Article 5. Once this crippling clause is removed, countries can start building a global system on citizens' initiatives and national priorities that ensure sustainability and support for small farmers.

Since the Government has accepted the WTO norms to make China's agriculture more dynamic and competitive, it is imperative that research and the use of new technology to improve yields be introduced. Despite boasting a vast output of farm products, China's technology lag in agriculture has restricted quality and hampered exports. It is reported that the Chinese Government's current investment in agriculture technology is about 10-15 percent of its overall spending on agriculture, and is less than 0.1 percent of the GDP. There is therefore an immediate need to elevate this ratio. While the policy makers highlight the impressive growth in the services sector and the benefits accruing from WTO membership, China, however, faces serious challenges in the agriculture sector in the coming years.