HONG KONG — China and India have seldom shared the same views on free trade in recent years, but they ended up on the same side at the collapse of world trade talks in Geneva on Tuesday because China made an abrupt about-face.
Growing worries in China about food security now appear to have overridden the country’s previous commitment to free trade — a commitment that has served it well until now as the country with the world’s second-largest trade surplus after Germany.
Since joining the World Trade Organization in November 2001, China has been a strong and outspoken defender of free-trade principles. It has been especially critical of the United States, for example, for invoking so-called “safeguard” rules to prevent an increase of Chinese textile imports that threatened to put American manufacturers out of business.
But this week, China allied itself with Indian negotiators in insisting on safeguard rules for agriculture. China and India insisted that developing countries be allowed to impose prohibitively high tariffs on food imports from affluent countries to halt increases in imports that might put farmers in poor countries out of business.
The United States and other food exporters refused to accept the Chinese and Indian position on food safeguards, and talks broke down.
In an editorial Wednesday, the official newspaper China Daily denounced the draft text that had been under negotiation. “This proposal would put the livelihoods of vulnerable farmers of the developing world in danger due to cheap farms imports from the rich world,” the editorial said.
By contrast, the Chinese Commerce Ministry had denounced the American use of textile safeguards in 2003 by saying that it was contrary to international principles on “free trade, transparency and nondiscrimination.”
The strong Chinese stance on farm goods comes at a time of rapidly rising worry in Beijing about food security.
Food prices have soared around the globe in recent months, particularly for rice, and many countries with a food surplus have imposed limits on exports to retain supplies for their own populations. China has become increasingly focused on making sure that its farmers can continue to produce most of the food needed for the 1.3 billion people in that country, and leery of having to rely on imports.
President Hu Jintao of China made this point when he met with leaders from the Group of 8 nations in Japan on July 9. According to a Chinese government statement issued afterward, “Hu said China attaches great importance to agriculture and especially the food issue,” and he noted that China “pursues a food-security policy of relying on domestic supply, ensuring basic self-sufficiency and striking a balance through appropriate import and export.”
Chinese officials have put increasingly stringent limits on the paving over of farmland for factories, office towers and residential projects. They have also held domestic grain prices well below international levels through heavy subsidies, to the point that Chinese officials have been aggressively chasing smugglers who try to buy cheap Chinese rice and other grain and ship it to neighboring countries for resale.
Until now, China and India have had divergent vested interests in international trade negotiations because they joined the World Trade Organization under very different circumstances and are covered by remarkably different trade rules.
The world’s major trading powers forced China to lower or eliminate most of its trade barriers in exchange for letting it into the trade group in November 2001. China accepted this deal because its membership forced other countries to eliminate quotas and cut tariffs on Chinese exports _ — and these exports have been soaring ever since.
Since China has relatively few trade barriers to defend, and since its exports are highly competitive in many industries, it has tended until now to favor open markets.
By contrast, India still has some of the world’s highest barriers to imports.
India was one of the 23 founding members in 1947 of the trade group’s predecessor, the General Agreement on Tariffs and Trade. Since then, it has successfully argued that developing countries already in the global trading system should be allowed to keep much higher trade barriers to imports than affluent countries.
Kamal Nath, the Indian minister of commerce and industry, and the top Indian trade negotiator, said in a recent interview that developing countries needed to be able to protect their own food supplies. “Every country must first ensure its own food security,” he said.
Mr. Nath also contended that developing countries’ farmers have too often faced unfair competition from industrialized countries — a point that China repeated this week. The United States and the European Union agreed to accept some limits on their farm subsidies in negotiations this week, but their reductions were much more limited than developing countries wanted.
Western manufacturers facing competition from China have sometimes contended that China indirectly subsidizes its exports by controlling currency markets on a massive scale to hold down the value of its currency. China has accumulated $1.8 trillion in foreign exchange reserves through these controls, most of it in the past five years.
But currency market activities are not covered by World Trade Organization rules, and China has begun to allow gradual appreciation of its currency since 2005 — although it continues to put heavy limits on this appreciation.
There is a long history of countries’ endorsing free trade in manufactured goods while opposing free trade in farm products. The United States and Western European nations created the current international trading system after World War II and dismantled many trade barriers for industrial products but did relatively little for farm trade until the completion of the Uruguay Round talks in 1993.
A seemingly obscure technical issue had the unlikely but crucial effect of helping to bring China and India together in an unbreakable partnership this week on the issue of food safeguards.
Negotiators had agreed that developing countries could impose some safeguard tariffs to restrict farm imports in case of a sudden rise. But there was no agreement on how high these extra tariffs could go.
Reducing agricultural tariffs has been an important part of the global talks. Food-exporting nations argued that in imposing safeguard tariffs, developing countries could only let their tariffs bounce back up to current levels — in other words, they could revoke whatever tariff reductions they endorse in the current trade talks and no more.
China, with support from India, demanded the allowance of safeguard tariffs
that would actually be higher than prevailing tariffs now — a demand that the
United States and other food exporters found unacceptable.