The Guangdong's People's Government has published a series of articles in Chinese on "Guangdong's Agriculture and WTO." This report is a translation of an article on the impact of China's entry to the WTO on the animal husbandry industry of Guangdong Province and what the Province need to do to face increased competition from imports. As Guangdong is one of the biggest provinces in China's animal husbandry industry, its strategies are indicative of the overall strategies of the Chinese Government.

Impacts of China's Entry into the WTO on Guangdong's Animal Husbandry Industry and Strategies

The U.S. A. and China signed the U.S.- China Agreement on Agricultural Cooperation in 1999. China is going to enter the World Trade Organization, which means it is going to open the market of agricultural products to face the challenge from foreign agricultural products.

Currently, China's agricultural facilities and technology are very backward, resistance to risks weak, production scale small, and the cost of agricultural production is considerably high. The competitiveness of agricultural products is considerably weak. After entering the World Trade Organization, China has to face great challenges from foreign countries. However, China is now one of the biggest meat producers in the world. The production of meat and egg of the country account for 28.9 % and 41.8% respectively of the world's total, covering about two thirds of Asia's total, ranking first in the whole world. The meat, egg and milk production per capita in 1997 is 49.5 kilograms, 17.2 kilograms and 6.3 kilograms respectively, the first two exceeding the world's average. The status and potential of China's animal husbandry industry are attracting more and more world attention.

I. Current production status of Guangdong Province and conditions after China's entry into the WTO:

Guangdong's animal husbandry industry underwent sustained and fast growth since China's opening to the outside world. The major livestock products have been on the rise for 20 years continuously. The production of meat, egg and milk has increased by 5.5 times, 35.5 times and 3.7 times, respectively. The total output of meat, egg and milk in 1998 reached 2.96 million tons, 292,300 tons and 74,700 tons and production of meat, egg and milk per capita in Guangdong equals to 41.66 kilograms, 4.1 kilograms and 1.04 kilograms, all lower than the average national level. After 20 years' development, the province's animal husbandry industry has transformed from the traditional self-supporting or semi self-supporting to modern commercial production and has become a considerably independent industry in the rural area. The demand and supply situation changed dramatically in the mid and late 1990s. The long term shortage in supply came to an end and a new development era began.

Guangdong has established a number of mass production poultry and livestock farms. The livestock products from these farms cover about half of the province's total and usually are of better quality and high competitiveness. For example, hogs from Guangdong are selling at the best price in the Hong Kong market. After China enters the World Trade Organization, the problem of feed shortage, the bottleneck that prevents the animal husbandry industry from further development, will be solved. The production enterprises can buy from the international market animal feed at a lower price. This helps to lower the production cost, making the products more attractive in terms of price. Besides, elimination of export quota or permit will encourage free trade. Making use of the geographic location and better quality, Guangdong can increase its exports to the neighboring countries such as Japan and India to generate more foreign currencies so as to promote a foreign-oriented animal husbandry industry.

II. Positive and negative impacts of China's entry into the WTO on Guangdong's animal husbandry industry:

On the whole, China's entry into the World Trade Organization has greater advantages than
disadvantages over Guangdong's animal husbandry industry. It will help promote the development of the industry.

1. Positive Impacts:

A. The conflict of developing the animal husbandry industry and shortage of feed grain will no longer exist. Currently, most of the feed grain used in the province's animal husbandry industry is purchased from other provinces or imported from foreign countries. Feed grain such as corn and soybean meal will be available in the international market at a price lower than the domestic one after China's accession into the World Trade Organization. By that time, the production cost will be lowered and competitiveness enhanced.

B. Livestock products are cheap and foreign products cannot enter the market. At present meat products in China are cheaper than those in the world market. Pork is lower by 57 percent, beef 84 percent and mutton 54 percent. China's advantage in price will be more obvious after its accession to the WTO.

C. Exports will increase to generate more foreign currencies. Elimination of export quota or permit will allow free trade in livestock products, and China's entry into the World Trade Organization will help tap the international market. Increases in exports can not only generate more foreign currencies but also give the farmers more incentives, thus promoting further development of a foreign-oriented animal husbandry industry. Guangdong exported 570,000 heads of hogs, 39.35 million chickens, 12,084 tons of frozen pork, 22,279 tons of frozen chickens and 43,441 tons of table eggs in 1998, generating foreign currencies valued at US$ 224 million.

D. Further promotion of science and technology, plus enhancing the technological content of the animal husbandry industry. The industry has to cope with intense competition after China's accession to the WTO. China needs to further strengthen the management of breeding stock and disease prevention and quarantine, readjust the structure of livestock products, hasten the pace of breed improvements to expand the coverage of improved breeds, use more advanced technology to improve the quality and increase the number of slaughtered hogs.

E. Promoting the development of the feed industry. The animal husbandry industry is inseparable from the feed industry, one dependent on the other. The feed industry in Guangdong has developed rapidly since the 1990's. The province now has more than 340 feed mills, producing 6.81 million tons of formula feed and compound feed in 1998, accounting for 12 percent of China's total. However, almost all raw materials were purchased from other provinces or imported from other countries. They will be available from the world market at a lower price after China's accession into the WTO. Therefore, the production cost of formula feed will be lower, which will also help the feed industry to develop.

A. On the dairy industry. Guangdong manufactured 74,700 tons of dairy products in 1998, the production per capita being 1.1 kilograms, lower than the nation's average. Guangdong's dairy industry has been developing at a slow pace because of the weak foundation, small scale, low production level and high production cost. Besides, the diet habit of the Guangdong people and challenges from foreign products also aggravate the situation. The low cost mass produced dairy products from foreign countries will take up much of the market share and makes Guangdong's slow growing dairy industry even worse.

B. On the production of broilers. The veterinary officials from the European Community pointed out sharply in 1995 and 1996 that self inspection by the farms is not credible and that inspection and quarantine should be conducted by official inspectors. Because the European Community closed its market for China's poultry products, China has lost the market share of frozen broilers equivalent to 30,000 to 40,000 tons. Meanwhile, the Asian financial crisis continues to affect the broiler industry. Japan used to be the major market for China's frozen broiler products. After the crisis, demand from that market has decreased and the price of China's frozen broilers exported to Japan has declined to record low.

The U.S.A. is the biggest breeder, producer and consumer of broilers in the world. As the world's main grower of corn and soybean, the U.S.A. has its advantages in the price of raw materials. It also has advanced agricultural technology and government subsidies. ( ATO Comment: This is what the Chinese author claimed.) The production cost of U.S. broilers is lower than that of China, consequently, U.S. broilers are more competitive in price. The CIF price of each ton of U.S. broilers is 1,500 yuan lower than the domestic ones. Besides, the major poultry product in the U.S.A. , the breast meat, is selling very well. In the contrast, popular items in China like chicken paws, chicken wings and chicken legs are regarded as by products or used as raw materials for manufacturing feed. Now these items are exported to China after low cost processing and packaging and are sold at a very good price. The smuggled chicken products are now legally accepted. Because of the wide margin, China imports about 2,000 tons of chicken products each day. After China's entry into the World Trade Organization, production of broilers will have to face great challenges. However, those unique local varieties such as the yellow feathered chicken, duck and goose are irreplaceable despite the lower price of foreign poultry products.

III. Guangdong's strategies for developing animal husbandry industry after China's accession into the WTO:

1. Strengthen macro control and management over the animal husbandry industry: First, plan the long or intermediate term development and distribution to develop the regional animal husbandry industry, and improve the distribution of the resources through planning, coordination, services and experiments. Second, strengthen legal management of the industry and regulate the production and sales of the products according to such laws and regulations as Animal Epidemic Prevention Law, Control Regulations on Breeding Stocks and Veterinary Medicines Control Regulations.

2. Readjust and improve the structure of the animal husbandry industry on the market basis: the structural contradiction of the animal husbandry industry is becoming more and more obvious. On the one hand, the amount of grain-fed animals is big and the market is almost full, always with unstable prices. On the other hand, the price for herbivorous animals has been high for years and the market potential has not been well explored. Therefore, readjustment of the structure to meet the needs of the market is needed to stabilize the production of grain-fed animals including hogs and chicken. Meanwhile, the local feed and land resources will be made full use of to grow forage grasses in order to develop the production of herbivorous animals like cattle, lamb, rabbit and goose. Rare and special animals will also be raised according to the needs of the market to establish the structure most suitable for the market.

3. Improve the quality of livestock products: One of the characteristics of the market is that competitiveness is intense and the products should be outstanding if they are to have a market share. The manufacturers should expand the scale and the technological content of production to develop new good products, apply advanced technology to improve the quality of meat products and enhance competitiveness in the world market against foreign meat products. The breeding stock system should be established and strengthened to promote the improvement and crossing of hogs, cattle and sheep, and the inferior breeds substituted with superior ones. Currently, the crossed lean meat hogs in Guangdong cover 40 percent of the slaughtered ones, and the improved yellow feathered chicken and broilers 85 percent, improved duck breeds 80 percent of the province's total. The improved cattle and sheep account for only 5 percent, a low percentage that needs improvement.

4. Strengthen the construction of animal protection projects: At present the veterinary quality of the meat products has attracted special attention in the markets at home and abroad, and requirements on the control over animal diseases are stricter. Therefore, the prevention of animal diseases should be strengthened. The prevention system which meets the international requirements should be established in line with the international practices to eliminate or control the epidemics restricted in international trade and to ensure the quality of the meat products. The animal epidemic prevention system, animal protection and supervision system, technical support and resource guaranty system and serious animal epidemic control system should be established, and Guangdong Animal Epidemic Prediction and Report Center, Animal Epidemic Information Network, veterinary laboratories on all levels, veterinary medicine residue monitor center should be better equipped. Emphasis will be put on the inspection at places of origin and slaughter houses and on the prevention of disease which can cause problems both in human body and animals. Veterinary supervision, production and quality control of breeding stock, veterinary medicines, feed and feed additives should be strengthened and production of counterfeited, forged and poor quality products cracked down to ensure sustained and healthy development of the animal husbandry industry and people's health.

5. Hasten the industrialization of the animal husbandry industry: Industrialization is the requirements market economy places on the animal husbandry industry as well as an effective way of developing the industry and enhancing competitiveness. Guangdong should orient to the market, profits and resources to identify the pillar industry, establish the key enterprises and commodity bases to realize modernization of the animal husbandry industry. Firstly, actively develop the key enterprises and give them substantial supports. Secondly, give full play to the production bases to enhance productivity and quality, educate the farmers to have mass production so as to establish the production bases of poultry and livestock products. Thirdly, develop the processing industry to add values to the products. Fourthly, actively explore the market and hasten the construction of specialized markets and enliven distribution of the livestock products. Fifthly, enable the privately owned transportation companies to display their ability in tapping the market and enlivening distribution. In other words, only when the separate links in production, processing and sales are combined into a unified industrial chain to face challenges and competition from foreign products can China's products occupy the domestic market and expand its global market share.

6. Regulate the feed control system and strengthen the management of the feed industry: The Feed and Feed Additives Administrative Regulations should be implemented and the focus shifted to safety and wholesomeness of feed and feed additives. Feed and feed additives which cannot meet the requirements of the industry or pollute the environment or contain too much heavy metals or add improper medicines should be eliminated from the market to ensure the quality of the cultured products and people's health.

7. Unify management in production and distribution of livestock products: The animal husbandry industry should include production, processing and sales and these three links should be closely connected with each other, otherwise industrialization of the animal husbandry industry cannot be realized. At present production is separated from trading in Guangdong's animal husbandry industry. Those engaged in production do not know the market while those involved in trading do not have control over production. This, to a certain extent, keeps exports of livestock industry from further development and weakens its competitiveness in the world market. Guangdong's animal husbandry industry will be in line with the world market after China's accession to the World Trade Organization, so will the trading system. Therefore, we should hasten the reform of the trading system to combine production with trading. Only in this case can China support the production of the animal husbandry industry and enhance the overall competitiveness of the livestock products. This will be beneficial and necessary for the development of the animal husbandry industry.