Extent of fair trade market and China potential for a bigger fair trade market

2. China potential for launching fair trade market

2.1 Brief overview of the rural economy in China

Before the economic reforms the rural sector in China is managed under a central planned system where it represented one of the biggest economic activities (beside the heavy industry). During the late 1950's the household farms, agricultural cooperatives, and people's communes were the fundamental structures for the agricultural sector finally characterized by inefficiency (H. X. Wu). The reforms introduced in the sector have changed the production and the pricing system. The significant change in the production system was the shift towards individualization with the introduction of the household responsibility system. The pricing system has been gradually liberalized in such a way that the Central Control remains only for so called strategic products under the governor responsibility system. The recent reforms introduce the grain subsidies, the tax abandonment, the multiplication of source of funding institutions (bank and rural credits cooperatives), the mechanization, and the promotion of new varieties of crops and breeds of livestock, poultry and aquatic species. The Government has also invested 431.8 billion of Yuan to modernize the rural sector^4(*). These reforms have had large positive effects on the agricultural sector; output and income have consequently been ameliorated. Significant increase has been recorded in rural net income, about 6% each year since 2005 (china economic net 2007). Agriculture contribution to the GDP has however decreased from 26.9% to 12.5% between 1978 and 2006 due to the speedup in the industrial and the service sector but also to rural exodus. The rural sector still remains the biggest employer in China (with 365 millions people more than half of the rural population estimated to around 737 millions of people or 56% of the overall population in 2007). The rural sector and in particular agriculture is affected in different ways that can compromise its future

2.2 The environmental issues

The agricultural sector is the biggest user of water with more than 65% of national resources or more than 400 billions cubic meters but with less efficiency in its management (Bin Liu). The agricultural sector comes before the industrial sector that is also consuming more and more water (Lohmar B. and Hansen J. 2003). It stands to reason that agriculture is also the biggest soil user, as with more than 22% of world population, China has roughly 7% of world farm land (L. Berry, 2003) that is exposed to rapid urban and industrial expansions and also to the intensive use of chemicals.

The excess use of fertilizers consecutive to the floods droughts or desertification to compensate the lost of nutrients in the arable lands have contribute to leave agriculture in a kind of vicious circle, knowing that the chemical fertilizers and pesticides can have adverse effects on other natural resources (air, water) and species. The destruction of biodiversity in China seems to be one of the highest in the world^5(*). The rural sector is bearing the cost of the overuse of natural resources in term of access to water^6(*) or to arable land^7(*). The question of polluted cultivated land, air and water combined with the overuse of chemical fertilizers and pesticides raise another question that is the food safety and health concerns^8(*). Many cases of food poisoning have been reported these last years (Dominique Patton, 2006; xinhua agency, 2007; Neil Merrett 2007). The question of food safety is sometimes raised by china trade partners; some them can be interpreted as protective measures, but many other debrief real concerns. Some observers have considered that there is a two tiers food safety method in China; «Chinese food producers will just make two different products: the export products will be 100% safe, but they will cut corners on food for the domestic market and keep on poisoning at home -- otherwise, where will their profits come from?^9(*). Despite this apparent duality in food production, it seems that the effects of unsafe food production has been noticed as abroad as locally, and this can be attributed to a insufficient control during the production process: «The government does not attach enough importance to supervise the course of food production, or to help food producers increase their own capacity to ensure food safety. Most inspection work is about finding and punishing those food producers that break the law.»^10(*) It seems that the official efforts to ensure food safety is somehow limited and some actors of the distribution channel tend to introduce much more speculation.

* ⁴ This figure is back from 2007 in China Economic net (citing China daily): Meeting to chart rural development for 2008 http://en.ce.cn

* ⁵ WWF China reports that the destruction of biodiversity is more severe in China than in many other countries around the world. 4000-5000 higher plant species are critically endangered or near-critically endangered, representing 15-20% of China's higher plant species, significantly higher than the global average of 10-15%, WWF China http://www.wwfchina.org/english

* ⁶ Elizabeth C shows «that there is the problem of access to clean water. Although China holds the fourth-largest freshwater resources in the world (after Brazil, Russia, and Canada), skyrocketing demand, overuse, inefficiencies, pollution, and unequal distribution have produced a situation in which two-thirds of China's approximately 660 cities have less water than they need and 110 of them suffer severe shortages», http://www.foreignaffairs.org

* ⁷ The people daily reports that: «Due to over-development, large areas of the country's grassland and farmland are turning into sandy land. The acreage of desert land in China has reached 2.62 million square kilometers and is expanding at a speed of more than 2,400 square kilometers each year», http://english.peopledaily.com.cn

* ⁸ Join World bank and China studies reveal that «The poor quality of China's scarce water resources, which is increasingly attributed to nonpoint sources such as agricultural runoff and municipal wastewater, has a significant health impact. The impact is particularly high in rural areas, where about 300 million people lack access to piped water»; Cost of pollution in China, economic estimates of physical damages The World Bank and State Environmental Protection Administration, P. R. China, 2007, p 33

* ⁹ Lian Yue, Strong opinions - Can the U.S. guarantee food safety in China? http://www.danwei.org

* ¹⁰ Bian Yongming, The Challenges for food safety in China,http://chinaperspectives.revues.org