Will tariff cuts stimulate China’s imports?
Cuts in China’s tariffs are unlikely to have much of a stimulative effect on seafood imports, say industry experts. On Monday, the State Council, China’s cabinet, promised it would be “appropriately broadening ” China’s imports of consumer goods as well as raw materials for energy and food.
“More money for import promotion will be added to the present money set aside for developing foreign trade,” read the statement. Local economists say by encouraging imports the government is trying to ensure inflation remains under control while also easing growth of its foreign currency reserves.
Seafood experts, meanwhile, believe free trade agreements (FTAs) are far more effective in boosting seafood imports. Fan Xubing of Beijing Seabridge Marketing & Consulting, an advisory assisting foreign seafood producers selling into China, believes tariffs on seafood imports are already comparatively low and credits a spate of free trade pacts signed by Beijing for lifting seafood trade with certain territories. Fan pointed to China’s FTA with New Zealand with growing imports as well as a surge in Chinese trade with the ASEAN block since an FTA kicked in two years ago.
International exporters, said Fan, are shipping seafood through Vietnam to avail of the zero-tariff trade that ASEAN members enjoy with China. China’s next major FTA will be with South Korea; negotiations started this week. Trade between the two is projected to rise to USD 300 billion by 2015, from USD 246 in 2011, according to China’s ministry of commerce. Interestingly, the government guidelines published on 30 April also promised more support for trade with developing countries, without specifying what such measures will be.
Chinese customs apply a 13 percent duty to whole fish and 17 percent duty to value-added products such as smoked salmon or fillets imported for processing and domestic consumption. “Customs will typically pick the product your fish or seafood type belongs to, according to their [codes] and the international codes, and they assign the tax accordingly,” explained Fan. Import tariffs are waived for product intended for re-export.
Inflation remains a key fear of Chinese policymakers. The local consumer price index (CPI) inched upwards slightly in March, reaching 3.6 percent compared to 3.2 percent in February. Food prices are key drivers of inflationary pressure in China, which saw inflation hit 6.45 percent in July 2011 before government tightening of bank credit led to a downward trend in CPI figures until the end of the year.
Traditionally, export-focused China has also been willing to see imports rise as it seeks to reorient its economy to a more consumption-based model of economic growth. Another often-cited reason for China’s increasing acceptance of imports is a keenness to offset pressure from trading partners like the United States for further appreciation of the local currency, the RMB.
China maintains punitively high taxes on luxury consumer goods but has encouraged the largely state-controlled local commodity purchasers like COFCO to increase imports of key food commodities like grain. China’s imports increased 6.8 percent in the first quarter of 2012, a 26 percent slow-down in import growth compared to the same period last year, a development seen by economists as a sign of a slowing Chinese economy.