China and US seal crucial farm deal

Farm subsidies have soured China-US trade relations

A breakthrough on the crucial issue of agricultural subsidies lay behind a recent US-China trade deal, the American government has revealed.

China agreed to limit protectionist support of its farming sector to 8.5% of agricultural output, as well as to demolish certain barriers to products imported from the US.

The two sides reached an agreement at an Asia Pacific Economic Co-operation forum meeting in Shanghai on 8 June, but details of the terms of the deal have only now emerged.

The deal removes one of the most troublesome barriers to China's application for membership of World Trade Organisation (WTO), which has been pending for 15 years and which now looks likely to be finalised before a new round of global trade talks is held in November.

Give and take

The farm deal represents a concession on both sides: the US and other rich nations were arguing for a 5% subsidy cap, while China was aiming for the 10% limit usually applied to developing countries.

The immediate beneficiaries could be US agricultural producers: China currently imports US farm products worth around $1.7bn (£1.2bn) per year, a figure that could rise by an annual $2bn if trade barriers are lowered as agreed.

The Chinese government has also agreed to open access to certain insurance and financial services sectors, as well as automotive and petroleum retailing.

In return, China now hopes that WTO membership can move ahead smoothly - something that will ease Chinese firms' ability to penetrate international markets.

Details

Not everything is yet resolved: although a farm deal was the main stumbling-block, negotiators still have concerns over a range of issues, such as China's relations with the EU and other WTO members, and lingering protectionism in a few minor industries.

WTO's Moore: Keen on China progress

WTO negotiators are to meet in Geneva at the end of this month to determine whether the Sino-American deal is workable.

There is considerable pressure to approve the deal.

WTO chief Mike Moore has repeatedly underlined his determination to resolve China's membership before the November talks get under way.