Washington Insider-- Thursday

China's New Five-Year Plan

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Japan’s Diet to Begin Debating TPP April 5

Consideration of the Trans-Pacific Partnership (TPP) trade deal is set to start in Japan’s Diet April 5 as the chamber this week cleared a Fiscal 2016 budget.

Deliberations are scheduled to begin when the Diet’s lower house convenes and will need to adhere to a fast schedule, as the Diet session will effectively end on May 26 with the start of the Group of Seven summit being hosted by Japan.

The ruling Liberal Democratic Party (LDP) hopes TPP will increase appeal among agricultural groups, ahead of elections for the Diet’s upper house. The LDP plans to emphasize assistance programs for farmers in making the case for TPP passage.

The opposition Democratic Party of Japan plans to fight TPP, appointing strong debaters to the TPP committee which will take up the matter first. The opposition party plans to assert that the governing LDP failed to seek enough protection for five key ag products when negotiating the TPP deal.

A scandal that led to the resignation of former Economic and Fiscal Policy Minister Akira Amari of the LDP is likely to also factor into the TPP debate. Opposition lawmakers point to the fact that Amari played a key role in TPP negotiations before subsequently resigning under the cloud of scandal, which they contend was not sufficiently examined.

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EPA IG Begins Effort to Study ‘Superweeds’

An evaluation of the efficacy of the Environmental Protection Agency’s efforts to delay or prevent the spread of herbicide-resistant weeds is being launched by the EPA’s Inspector General.

The evaluation will document the steps EPA is taking to prevent herbicide resistance, how EPA assesses the health and environmental impact of herbicides designed to combat herbicide-resistant weeds and how EPA is monitoring the spread of herbicide-resistant weeds.

Weeds resistant to the herbicide glyphosate are a growing concern for US farmers, so much so that new multi-herbicide weed-killers, like Dow Chemical Co.’s Enlist Duo, are being actively developed.

The Inspector General is also examining the use of structural fumigants and how EPA determines the efficacy of antimicrobial pesticides. EPA efforts to maintain the herbicide-resistance of genetically modified corn are also being studied and a final report on that specific issue is expected to be released by mid-summer.

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Washington Insider: China’s New Five-Year Plan

It is hard for Westerners to know what to make of China’s five year plans. The 13th, recently described in detail by the Xinhua News Agency, calls for major economic changes, but also continues a number of the contradictory policies of recent years, Xinhua says.

The published “plan” is primarily an outline with details to be published later but promises an extensive makeover for the country’s agriculture. It will demolish “walls between city and countryside and stop pillaging the environment,” Xinhua says but also will “cement the control of China’s mandarins over the food supply.”

The plan is nothing if not ambitious. It says it will shift the sector from “hordes of peasants cultivating tiny plots with hoes and water buffalo,” into one with “professional farmers” who grow crops as businesses on “appropriate scale” parcels of land, using tractors, data-driven management and high-tech irrigation systems.

The social commitments are enormous, as well. The nation will speed up the conversion of rural people to bona fide urbanites, address chronic rural poverty (in large part by moving people out of desolate places), play a more active and assertive role in the world economy, participate in global “economic governance” and develop designated regional belts within the country.

The nation also plans to continue to emphasize food security, especially self-sufficiency in cereals and will designate “permanent farmland” areas. The plan also repeats a regional compensation system for grain-producing areas that has been around for nearly a decade but never seems to get implemented, Xinhua says.

China will allow imports to play a role in the food supply, but will control them tightly. Exports of commodities in which China has a comparative advantage will be expanded.

Creating a system to develop and disseminate agricultural technology is another measure intended to increase production capacity, focusing mainly on seeds as well as improving the “research environment” at key laboratories. Varieties compatible with mechanization are singled out for development.

The most adventurous part of the plan is the proposed overhaul of the agricultural business system into diverse types of “appropriate scale” farming. “Family farms” – farms big enough to be operated with the labor of a husband and wife – are to be the foundation of the system, but other forms of cooperatives, unions of farmers, farming trusts and company-operated farms will be investigated. In addition, the plan also calls for orderly and stable land transfer mechanisms.

The new-type farms are to be supported by a number of institutions including a mainly privatized service system that includes technical advice as well as e-commerce. And, the system of supply and marketing cooperatives set up in the 1950s to supply inputs to communes is tagged for reform (again).

While the plan endorses moving toward greater market orientation, it also expects to retain farmer subsidies in order to ensure profitability and to promote investment in the new types of farms. The plan says the country will expand “green box” subsidies that are not limited by WTO rules and make improvements and adjustments in “amber box” subsidies.

The plan offers a number of additional bells and whistles—for example minimum price policies will be continues, but be “improved.” The level of grain reserves will be “scientifically determined”, and officials will figure out how to inject reserves into the market in a better way. “Smart” grain storage will be built, and officials will entice farms, processors, and other diverse operators to hold reserves of farm commodities.

Xinhua says the plan has great significance, especially in its aspiration to de-compartmentalize the Chinese economy and to turn agriculture into a commercial effort. It sees the integration of agriculture, the countryside, and rural people as “long overdue.”

However, such massive plans are both difficult and risky. The obsession with self-sufficiency reflects an outdated view of China’s food system, Xinhua says, with officials concerned that “agricultural profits need to be higher, but in fact Chinese net returns per acre of land are already sky-high compared with other countries.” The incompatible objectives of maintaining “food security,” raising returns to farmers, and sustainable development will inevitably conflict, demanding a cascade of subsidies, regulations, and an ever-greater role for officials.

A critical bottleneck likely will be the effort to maintain tight control over land and banking, two critical components of a modern agricultural economy, along with the intended flood of subsidies, can be expected to “create juicy opportunities for corruption” and mismanagement, Xinhua suggests.

Well, no one thought China would abandon its commitment to central planning, although the nation has been promising loosened controls for years. And, to some degree, that seems to be happening. Still, heavy interventions are a widely revered economic tool in China, even if some of the earlier economic sheen has been lost following economic stumbles. Once again, China plans to make vast economic and social changes in its agriculture and even if only a few of the plans are actually achieved, the impacts could be significant and should be watched carefully as they emerge, Washington Insider believes.


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(GH/CZ)