Leading candidates emerge in contest to score free trade deals with China

Published on
August 7, 2017

Foreign diplomats in Beijing are angling to entice China into a trade deal that will give their individual countries an edge in trade. For the world of seafood, this could mean the elimination of duties of up to 25 percent – a huge advantage in what has become the world’s top seafood consumer by total volume.

China currently has a free trade deal with 15 countries, including Chile, Peru, and Costa Rica in Latin America; Iceland and Switzerland in Europe; and South Korea, Singapore, and Pakistan in Asia. In terms of trade volume, perhaps the biggest deals are those China has signed with New Zealand and Australia. Of course, all of those are dwarfed by China’s free trade agreement with the Association of Southeast Asian Nations (ASEAN), which allows tariff-free entry of seafood into China from 10 countries, including Vietnam, Thailand, and Indonesia.

Looking to further its ambitious trade objectives, China has openly acknowledged negotiating or considering free trade deals with Sri Lanka, Norway, and Israel. Beijing has further signalled it would be interested in free trade pacts with Bangladesh – long a political ally and a big player in shrimp production – as well as Fiji, the Maldives, and Canada. All four are conducting “feasibility” studies with China on future free trade deals. 

China is also considering dealing with Ecuador and Colombia. In Ecuador, shrimp exporters have long called for a free trade deal with China so they can compete with countries that already have one, including Vietnam. However, Ecuadorians and Venezuelans may be disappointed by the fact that Colombia is in the mix, considering the fact that both regional rivals already well within China’s orbit as trade partners and recipients of loans-for-oil from China.

In most of its trade deals, China moves to guarantee supply and flatten prices at home in order to tame food price inflation. Free trade deals, which take a long time to negotiate, give exporters an enviable edge in sales to China. For China, which is facing a steady upward trend in domestic seafood prices, the idea of importing a larger percentage of its seafood is looking increasingly feasible and desirable.

This shift will be assisted by the fact that the gap in the cost of production between imported and local seafood products in China is set to widen, in favor of imports. China has lost its competitiveness in the production of most agricultural commodities. Although labor is still cheap in China, land and water are scarce and getting scarcer and more expensive compared to the European Union and the United States.

At the same time, a crackdown on China’s so-called “grey markets” – which use back channels or secondary markets to bypass regulations, taxes, and oversight – is also boosting the prospects of China’s free trade partners. China has signaled that it will tighten its customs regime even further in the future, squeezing out the grey trade as more avenues open up and more regional airports and ports are allowed handle seafood imports. Local governments, having lobbied hard for the right to conduct customs and handle food imports, are now pressuring for a crackdown on the grey trade so that they in turn can collect the duties that comes with having an international freight airport or port on their hands. 

Environmental issues are also a major factor pushing the favorability of seafood imports into China. As China has pushed to better enforce its environmental laws, the green-white livery of the newly formed environmental police has become a source of fear for factories and farmers being checked for slurry leaks. Likewise, food safety standards in China are a work in progress and the system currently being put in place will take some time to show results.

All this means that imported food products will continue to enjoy advantages over local produce. 

Meanwhile, China is continuing to look at ways to export more of its production overseas. China may seek to use its advanced know-how in aquaculture to commence or increase production of shrimp and other products in countries with which it has free trade relations, like Bangladesh or Colombia. 

Contributing Editor reporting from Beijing, China

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