POLITICS AND WHEAT TRADE: IMPLICATIONS OF USING WTO ACCESSION AS LEVERAGE TO INCREASED MARKET ACCESS IN CHINA (The TCK Quarantine Link)

A game-theoretic model was developed to analyze bargaining between the US and China in the context of linking China’s TCK phytosanitary quarantine on wheat imports from the Pacific Northwest and China’s accession to the World Trade Organization (WTO). From this model, scenarios were derived that characterize the future of US-Sino bilateral relations. A spatial world wheat trade model (PNWSHIP) simulates the impact on US wheat export prices, volumes, and net benefits of trade. Trade model simulations are based on assumptions that differ for each scenario and pertain to China’s income growth trajectories, its WTO status and the status of the quarantine on PNW wheat exports. A simulation assuming China had been granted WTO membership since 1995 with the quarantine still in place increases the annual net trade benefits of US wheat exports $273 million by the end of the century and $1.3 billion in 2015. These increases were compared to projected net benefits of the current status quo relations with China. Removal of the quarantine by China expands US net trade benefits by only an additional $1.04 million in 2000. But denying WTO accession to China accompanied by a trade war scenario could have resulted in a net reduction of trade benefits by $135 million compared to the current status quo in year 2000. The conclusions drawn from both the game-theoretic and economic models carry policy implications of alternative US bargaining strategies over the issues of China’s WTO accession and specific market access issues that have or could arise. The TCK quarantine was provisionally removed during Zhu Rongji’s trip to the US in April. The paper illustrates how this issue, considered important from a regional perspective, was minor relative to the over all potential impact of WTO accession. In an extreme scenario, linking WTO accession to lifting the quarantine, could have conceivably set off a backtracking of relations to Cold War bilateral trade status with significant negative trade impacts for the US wheat industry. While the quarantine issue is the illustrative example, other economic or noneconomic disputes could devolve into similar outcomes. In the TCK controversy the US appears to have achieved additional market access in China as a result of the WTO accession bargaining process. The role of a TCK task force addressing the risk of introducing dwarf bunt disease to China illustrates how * Jones is Professor of Agricultural Economics, Carlson is Associate Professor of Political Science, Li and Guo are former Graduate Research Assistants at the University of Idaho.