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

A. Current Status of Import and Export of Aquatic Products

Aquatic products exported and imported by the Guangdong province accounted for 17.6% and 15.1% of the total amount of the country in 1998. The top products were roasted eel, live fish, chilled fish and dried fish fins. Guangdong has exported its products to 55 countries and regions. From1993 to 1998, the total value of import remained steady, ranging from USD120million to USD190million. The province mainly imported fish meal, eel fry, dried fish fin and frozen fish.

a. Development of import and export trade

Export of aquatic products is very important to the development of the Guangdong fishery industry. In the first half of 1998, 17.6% of the exported fishery products of China was from Guangdong while 15.1% of imported aquatic products of the country was made by the province. Export of aquatic products of Guangdong province were in three phases.

Firstly, from 1978 to 1992, steady development of exportation thanks to the economic reform in China and China's policy of opening to the outside world.

Secondly, the years between 1993 and 1995, rapid increase in exportation. In these three years, the average export value of aquatic products was 1.32% of the total export value of Guangdong province. 31.91% of its fishery products depended on foreign trade. Meanwhile, eel raising spread very fast in the late 1980's. Export of live eel was switched to roasted eel and it contributed a lot to the export value for the province.

Thirdly, after 1996, decrease of exportation of seafood products because of the fluctuation of Asian seafood market and the Asian economic crisis. The value of exported aquatic products dropped from USD787 million in 1995 to USD499 million in 1998, and product varieties were limited to roasted eel, live fish, chilled fish and dried fish fins.

b. Distribution of Export Destinations

According to the statistics from Guangdong Customs, aquatic products of the province have been sold to 55 countries and regions. However, 99.65% of the products were sold to 12 countries with Japan, Hongkong and the United States purchasing 89.08% of the total value.

Following is the distribution:

• abUSD101million of roasted eel was exported, 88.01% of it was sold to Japan;
• abAmong all aquatic products sold to Hongkong from mainland China, Guangdong accounted for 70%. Specifically, Guangdong accounted for 91.83% of Hongkong's import of live fish; 96.79% of dried fish fins and 88.26% of chilled fish;
• abProducts being exported to U.S. were roasted eel, prawn, shrimp meat, frozen fish meat and salted fishery products;
• abThe sales value to European countries was small. Started from 1996, EU banned poultry products from China, but they did not stop importing aquatic products from Guangdong. Based on the statistics provided by the Guangdong Import and Export Inspection and Quarantine Bureau, 3,900 tons of aquatic products, mainly frozen fish meat and frozen small shrimps, were sold to EU from Guangdong in 1998.

c. Current Status of Import and Export Trade

Historically, the import of aquatic products was steady, fluctuated between USD120million to USD190million between 1993 and 1998. The main products were fish meal, eel fingerling, dried fish fin and frozen fish. In 1999, Russian became the largest supplier of seafood for China. In the first half of 1999, Russia exported to China 0.3million tons of fishery products, valued at USD230million, an increase of 25% in volume and 28% in value from the same period in 1998. China also bought from the United States, Argentina, EU, Chile, Japan, New Zealand, and Indonesia.

B.International Competition

A. Main products

1. abDomestic ocean fishery resources had decreased and most of the catch harvest tended to be smaller younger fish with low market value. As a result, the fishery processing sector did not have steady supplies. Moreover, domestic market for fresh products was very active and prices were high. For some products, the prices were higher than those of the international market. Thus, China did not have competitive power in export. In 1998, wild catch harvest of the Guangdong province was 1.95 million tons. Among them, 1.47 million tons were fishes and over 100,000 tons were fishes of low to moderate market value, such as the belt fish. As the harvest higher value seafood could not be maintained, Guangdong was unable to export lucrative products like crabs, shrimps or shell fish in large quantity. In contrast, nations like the U.S., Canada, Australia, New Zealand, Malaysia or Singapore, have sufficient high value fishery resources for export and competitive advantage.

2. abSea water and fresh water aquacultural products are in a better position to compete on prices. Sea water pearls, ornamental fish and related products have been marketed very successfully in the international market. Restrained by the conditions of aquacultural and fish meal production, China's aquacultural products have lower competitive power in the international market. There are three constraints in this sector. First, heavy dependence on import of brood stock and production is being affected by external factors. In 1998, Guangdong imported more than 20 species of fish brood stock. The import volume of eel brood stock directly affected the eel farming. Second, poor water environmental quality for aquaculture. The water quality of numerous aquacultural area was contaminated by domestic and industrial sewage. Third, indiscriminate use of chemical products to combat diseases left a high residue in aquacultural products and contributed to lower production. As brood stocks were reproduced without adequate guidance, diseases spread fast among fish farms and shrimp farms. Although the scope and volume of aquaculture in developed countries are not large, their technology level in producing brood stocks, animal feed, pesticide and value added processing is much higher than China. They are more competitive in quality.

3. abProcessing technology of aquatic products as a whole was weak. Only 20% of the harvest were processed, 30 points lower than Japan. The industry lack high value-added products and advanced processing techniques. Other than roasted eel, most of the processing techniques in Guangdong were rudimentary. Processing quality standard was far behind that of the developed countries. In fresh water aquacultural production, the supply of fresh product was greater than market demand and processing technology had not kept pace with production. As a result, aquacultural products was unable to advance further. Guangdong had a scarcity of high value-added seafood products, its technical processing capability was low and its use of processing residual (rejected) products was limited. In contrast, international processing of aquatic products developed rapidly since the 1970s, and about 75% of the products were processed into different kinds of convenient and microwave food before selling. Only one fourth of the aquatic products were sold fresh. In addition, aquatic products have become an important raw material for pharmacy, chemistry and biotechnology.

B. Status of Fishery industry in developed countries.

The characteristic of aquacultural development in western countries can be summarized: relying on the results of current technological advances, using ocean fishing as the foundation and mechanized fishing as the break through, with continuing use of fishing resources as objections, increasing the total strength and hastening the modernization of the seafood industry.

1. abThe scope of aquaculture. Aquaculture of developed countries has reached a high level in using modern equipment, selecting aquacultural species and effective management. Production is focused on biological and genetic engineering, cloning and other new technologies;

2. abHarvesting. Developed countries are more advanced in the technology of probing, automated processing lines and harbour construction than the developing countries;

3. abProcessing. In the1990's, processing technology and automation of fishery industry in the world had made great progress. Over 70% of aquatic products in developed countries were processed. These products were of high value and were sold not only as food, but also as medical usage, health care, animal feed, health and industrial purposes.

4. abFeeds and chemicals. Feeds and chemicals were produced to meet the specific growth needs of different species to promote efficiency and efficacy with due attention to and food safety.

C. Management of fishery industry in developed countries.

1. abDeveloped countries emphasize preserving resource environment to protect seafood resources and to lay the foundation for quality product assurances and sustainable utilization of the existing resources. A. Monitoring of fishery resources has become a regulate task as its results are indispensable scientific basis for managing fishery resources. B. Japan, U.S. and Canada pay close attention to the expansion or movement of fish groups. They worked very hard to improve the production potential of offshore aquatic resources. C. Developed countries maintain the sustainable utilization of the natural fishery resources through quota harvest system. For example, EU and Norway decide the allowable total annual catch based on the fishery and environment data. D. Environmental protection is very important in western countries. Water circulation system is applied in aquacultural farm and cultural sewage has to be treated before draining.

China has not set up a resource monitoring system targeting the sustainable utilization of biological resources. (ATO Guangzhou note: moratorium on summer harvest has now been implemented for two consecutive years.) It faces serious challenge in preserving fishery resources , protecting water environment, increasing the cultivation of resources and the limitation of seasonal ban of fishing.

2. abDeveloped countries have a complete quality management system and they maintain high standards in sanitation and technology. EU was especially concerned with the profound changes in global economy and trade system after the founding of the WTO. It made great efforts to build technical barriers and phytosanitary in business and trade. Since 1995, the EU had reorganized, changed and abolished its existing laws and regulations. It introduced an official quality management system for food products and a self-monitoring system for producers. These administrative actions gradually formed a new set of regulations and laws for managing the production of all kinds of aquatic products. Moreover, they required countries exporting to the EU to have regulations with similar effects. Based on China not having a similar quality management system, EU stopped importing of poultry products from China in 1996 and banned importing of Chinese shell fish in 1997. Every aquatic cargo from China had to be inspected. Consequently, the export of aquatic products to EU was seriously restricted.

3. abThe status of quality management of China's export aquatic products is less than satisfactory. Firstly, the quality control of marine products in China is lax. The export standard of these products is different from those sold in domestic market. Aquatic products can be sold in China without a test for residue. Secondly, The quality standard of China's aquatic products is lower than the international standard. This prevents China from adapting to and making use of international trade laws for fair trade and the dumping of inferior aquatic products from other countries. While most of the export products are of high quality, their prices are high. Without a safe and open sales channel, there products are not selling well in domestic market; they have to rely on overseas market with its high risks. Thus, the production of export products is unsteady. Thirdly, there is no regulation that requires products in domestic market to pass a residue test before selling. The fishery administrative departments do not include the inspection of aquacultural water quality, disease prevention, stock breeding management or promotion of healthy aquacultural technology in their management of aquatic products exportation. Fourthly, China needs to have WTO related regulations and management procedures. The basic requirement of the WTO Animal Health & Plant Phytosanitary Inspection Agreement is on quality control throughout the entire processing process and its trace ability. China has not begun implementing a system of quality control. Consequently it is unable to meet the EU requirement of issuing an official certification water quality of the fishing or aquacultural area.

D. The role of trade organizations in developed countries.

The trade organizations present issues of common interest to their government with suggestions for solutions. They promote pooling of resources, technology cooperation, common standards and marketing strategies. These organizations are good at obtaining technical, capital and social support for their enterprises. Companies are encouraged to maintain their reputation of high quality and to publicize the advantages of product origin. Many countries have detailed information on nutrition facts, the supply time and the uniqueness of aquatic products. They exhibit at various international trade shows and tasting seminars to introduce exporters to buyers.

C. Positive and negative impacts of WTO on Guangdong's fishery industry

a. Positive impacts

After twenty years of development, Guangdong has gained the potential to open up the international market extensively. Its aquatic products supply capability is over 70 kilo per capita and some product supply has exceeded demand. It is critical for this industry to enter the international market. In the long run, China's entry into the WTO will create new opportunities for Guangdong's fishery products.

1. Spur Guangdong to optimize allocation of its abundant fishery resources.

As only 2.65 million mu out of 11.6 million mu of shallow coastal water have been used, for aquaculture, Guangdong has a vast area for marine farming. With the WTO accession, Guangdong can optimize the development of its resources to compete at the international level(1 mu = 666.67 square meters);

2. Broadening exportation of Guangdong aquatic products.

Bases of aquaculture have been formed in Shunde, Chaozhou, Shantou, Zhanjiang, Raoping, Taishan and Shenzhen, producing a number of high quality aquatic export items. Many companies in Guangdong have sold eel, prawn, fish and pearls to other countries. The province has trade connections with more than 55 countries and regions and is expected to escalate exporting after the WTO admission.

3. Accelerate the modernization of the fishery industry.

The fishery industry of Guangdong is at a crucial stage for speeding up the level of modernization. The production structure, the breeding sector, and the processing technology are far behind those of the advanced countries. The seafood industry in Guangdong can be improved through learning from other countries in terms of technology, management, and processing techniques.

b. Negative impacts

After China's entry into the WTO, the external environment of Guangdong's fishery will change. In recent years, the fact that smuggling of soft-shell turtle and abalone from Taiwan and Southeast Asia had adversely affected similar products of Guangdong showed that Guangdong's fishery industry was not strong enough to confront with the challenges from foreign countries. It should be noted that the WTO agreement brings not only opportunities, but also severe challenges.

1. Guangdong's fishery industry will be more vulnerable to the international economy and the fluctuation of international fishery market. In the past twenty years, the free trade of aquatic products had expanded and the total volume kept growing. By the volume of export, Guangdong is ranked the 3rd in China. Its main export products were live and chilled fish, ornamental fish and roasted eel. After China's entry into the WTO, it will need to interact more with the international market. Its business will be more affected by the changes in the international market.

2. Three kinds of products will be affected. First, products of relatively higher cost such as soft shell turtle and abalone farming, which are 10% to 20% higher than the production cost in Taiwan. Second, products requiring high techniques, such as sea water aquaculture. Guangdong is not able to produce enough brood stocks of the new species and needs to import large amount from other countries or regions. The province lacks mature aquacultural techniques that can be adopted by various aquacultural farms. Third, products that have no obvious comparative advantages (such as the shrimp which is similar to the products of Thailand).

3. Some of Guangdong's fishery companies will face severe challenges, as most of them do not have the requisite market awareness and necessary technology. When the support of the government no longer exists, it will be hard for the companies to compete internationally.

D. Strategies

Confronted with new challenges and new opportunities, Guangdong should draw on the experiences of foreign countries and study the regulations of WTO to come up with some systematic and practical strategies applicable to the specific conditions of the province.

a. Develop fishery products that are marketable.

Fishery industry is an important component of the agricultural and rural economy of Guangdong. It has achieved a great deal in enhancing the lives of its people and the development of the economy. In addition, fishery industry has a large potential in earning foreign-exchange. Compared with Thailand and Taiwan, the natural conditions of the province are similar, but its export value is much lower than the products from these places. With China's entry into the WTO, export-oriented enterprises will have new trading opportunities. Guangdong should enhance the competitive strength of these companies.

b. Adapt to international market requirements and adjust production structure.

Since globalization and free trade are the trends, Guangdong should strengthen its regional advantages, adjust the production structure, develop its own unique products, improve its processing technology, and accelerate the circulation of aquatic products.

c. Reform the management system in the fishery industry.

In general, the current management system in the industry does not correspond with the international system. It is necessary to build an administrative system in production, circulation and processing for the further development of fishery industry. The supervision agency for the fishery industry should be in charge of the quality of aquatic products and residue inspection, so that they can take care of the related issues ranging from brood stocks, feed, residue inspection, to market management. The responsibilities of fishery administrative departments should be enlarged and have a division of labor to avoid confusion of multiple leadership.

d. Enhance quality management and emphasize inspection of residues.

Using the advantages of its economy and public policies, Guangdong should seize the initiative in overcoming unreasonable administrative system and inadequate management control. Being a large aquacultural province with distinct regional differences, Guangdong should implement regional management to separate environmental management, ecological aquacultural development and ordinary aquacultural farming. It should also form a set of standards for environmental production, quality control and producers' self-monitoring. Guangdong government should take the lead in emphasizing the quality control and residue inspection in links of production, marketing, distribution, processing, sales and purchasing. To lay a solid foundation in domestic and international markets for Guangdong's aquatic products, the province should create brand name products while advancing its technology, product quality and food safety level.

e. Assist in building up the sales market and cultivate a healthy and orderly market flow.

Guangdong should increase the building of wholesale markets and require all trading of aquatic products be carried out in these markets. In addition, a certificate of product origin should be required for those selling aquatic products for the first time. With these measures, high quality products will not be mixed with the inferior ones and a safe and orderly market can be built.

f. Advance technological development in aquaculture and product processing.

To increase the competitive edge in the international market and to expand the export of fishery products, the technology gap between the Guangdong fishery industry and the developed countries must be narrowed. Confronted with the weak links in the fishery industry, Guangdong should give priority to the technology of brood stock production, commercialization of famous products and research in disease prevent. To produce a number of low cost but high standard new products which meet the requirements of international market, the province should stress the promotion of new technology on healthy aquaculture, the advancing of processing techniques and the study of cultivation medicine and feed.

g. Accelerate the building up of an information system for data collecting and market analysis.

A sensitive and efficient information system for the fishery industry is essential to the improvement of competitive strength. The province should build a unified and informative center to provide data on aquatic products in Guangdong for the local and international markets. To disseminate timely information, the work of statistics collection and trend projection should be stressed. The province should also encourage seafood enterprises to build web sites to promote e-commerce.

h. Increase government support in marketing and quality control

Learning from the experiences of other countries and making full use of "green box" policies, Guangdong should increase the government support for the fishery industry to foster export-oriented enterprises, build up a system to promote aquacultural technology and disease preventing, step up efforts to promote advanced technology, build up a monitoring system for fishery resources to ensure the steadiness of the water environment for fishery resources and form an inspection system for quality control to improve the quality of Guangdong's export aquatic products gradually.