Wednesday, October 18, 2017

China Food Export Assistance Program Expands

China is expanding a food export promotion program that it agreed to stop subsidizing last year.

China's "food and agricultural export quality and safety demonstration district" (出口食品农产品质量安全示范区) program aims to assist food processors and their farmer-suppliers in reaching international standards so they can break into international markets. The program is overseen by China's import and export inspection and quarantine bureau (国家质量监督检验检疫总局) and is implemented by provincial and local government departments. The inspection and quarantine agency selects rural districts across the country to join the program. Local officials help food processing and trading companies and surrounding farmers in a "production base" adopt international standards, obtain certifications, and eliminate toxic chemicals and pharmaceuticals from food and agricultural products.
Ceremony for founding of a food and agricultural export demonstration district.

The program has been underway in China for a number of years. Last month, China's inspection and quarantine agency announced 78 new agricultural and food export demonstration bases approved in 2017. The list was posted along with a list of 289 previously-approved export demonstration bases. The agency also has an online directory of the demonstration bases with a brief description of each. Export demonstration districts are located in every province. Each district features different products. The bases approved this year include garlic, onions, mushrooms, broccoli, carrots, chicken, eggs, pork, beef, mutton, deer products, apples, apple juice, pears, peaches, kiwis, tangerines, lemons, mangoes, tomato paste, strawberries, blueberries, peppers, grapes, dates, chestnuts, shrimp, pet food, herbal medicine, flowers, rabbits, honey, fish, shrimp, rice, flour, sweet corn, tea, yams, peanuts, cooking oil, and mineral water.

In 2016, the U.S. Trade Representative announced that China had signed an agreement to terminate subsidies for a “Demonstration Bases-Common Service Platform” which sounds exactly like this program. The United States challenged the program as a violation of China's World Trade Organization commitment to forego export subsidies. Regarding last year's agreement, one Congressman said, "Trade is crucial for the agriculture industry in my California district...Our growers play by the rules and we expect the same from our trade partners."

Many provincial governments have announced their newly approved food export bases since last month. Shaanxi Province's announcement says it aims to have 20 export bases with annual production of US$1 billion by 2020. The program's objective is to expand the province's food and agricultural exports. The province hopes to create 1 or 2 large food-exporting companies with sales of $100 million and 10 food exporters with sales of $50 million. The demonstration bases are centered on food and agricultural processing and trading companies with participation by a "production base" composed of farmers in a surrounding county or prefecture. The program is supported by coordinated efforts of multiple provincial or local government agencies. The Shaanxi program specifies roles for provincial agricultural, commerce, and environmental protection departments, food and drug administration, technical supervision bureau, and local authorities.

Shaanxi's announcement called for "strengthening support" with a provincial industrial development fund as the primary source. Support includes setting up online databases of international standards; subsidizing certifications for Good Agricultural Practices, HACCP, organic, and domestic "green food" and "pollution free" programs; assistance for participation in international exhibitions and trade shows; testing for pesticides and veterinary drugs; training programs for farmers and company personnel; product and chemical testing labs; publicizing standards; and giving awards and punishments for compliance with standards. The program features establishment of traceability systems and record-keeping for food products and for chemical inputs and veterinary drugs.
Provincial official explains food and ag export demonstration district organization work to local officials.

Hunan Province announced nine new food export demonstration districts. The provincial inspection and quarantine bureau's party secretary said the province's agricultural exports had risen rapidly under the 7-year-old demonstration base program. He said 60 percent of the province's ag and food exports come from the demonstration bases, and Hunan's ag and food exports rose from $485 million in 2009 to over $1.3 billion in 2016. Hunan's food exports through August this year are up over 11 percent. In Changsha County, a pilot program has linked producers with a food retailer that sells products abroad through its international procurement system. Hunan aims to further expand food exports, including a plan for "backbone" companies to penetrate Mongolia, Central Asia, and Russia through the "One Road One Belt" initiative.

Dalian Prefecture in Liaoning Province has five national-level food export demonstration districts featuring grain processing, fruit, chicken, horseradish, seafood, edible fungus, vegetable products, and eggs, as well as a provincial-level poultry export district. Enterprises in the districts account for 70 percent of Dalian's food and agricultural exports. The Wafangdian demonstration district reportedly accounts for 70 percent of China's apple exports to the United States. Dalian exported 61,000 metric tons of poultry last year and accounts for most of China's frozen poultry shipments to Hong Kong. The local inspection and quarantine service gives priority for inspection and testing to demonstration district products, uses standardized procedures to test for chemical residues, heavy metals, and toxins; conducts quality monitoring of export companies in the districts. The Dalian government promises greater financial support for investment in inspection and testing capacity in both government departments and companies in the demonstration districts. Lab testing fees will be subsidized and financial awards will be given to farmers and companies.

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