China Should Learn from America and Japan to Protect Agriculture

Debate circling issues concerning agriculture, rural areas and farmers at the annual “two conferences” (i.e., the National People's Congress and the Chinese Political Consultative Conference) has been intense as usual. We are easily reminded of the successful experiences Japan and the United States have had with agricultural issues. Although these countries have been threatened by severe inflation in their course of economic development, their governments have never failed to secure the progress of agriculture and the benefits of farmers, making sure that farmers are first to receive the perks of a developing economy.

During the Great Depression, when market prices were flying sky high, the Roosevelt administration in America conducted the world-renowned New Deal, of which policies supporting agricultural development and enhancing farmers’ income were a crucial part. Government-initiated investment in agriculture began with infrastructure construction in rural areas, distribution of farming technology and techniques, as well as provision of tax credits, subsidies, loan and insurance services for agriculture and agricultural products, all aimed at supporting agricultural development. Following the above, the administration issued a plan to maintain the prices of farm products at a reasonable level, with combined efforts to prevent drastic drops in prices as well as over-production. Thanks to policies that expanded domestic need, encouraged export and limited import, farmers in America were granted much wider access to national and international markets. More recently, the American government has placed eco-farming, technology, accessible loans, information management and information services at the top of its agricultural policy agenda in response to current agricultural science advancements and increasing trade frictions surrounding farm products.

Even though less than 2 percent of the American workforce belongs to the agricultural section, agricultural revenue still accounts for more than 10 percent of the country’s national income. The Americans owe this achievement to its consistent government policies dedicated to protecting agriculture and increasing farmers’ incomes, especially during times of rocketing prices and acute inflation. Not only has the nation accomplished the commercialization, modernization and intensification of agriculture, it has also managed to gradually close the gap between farmers and other income groups. Agricultural interest groups have furthermore matured into influential forces in political debate and public policy.

As an island with scarce land and labor resources, Japan is highly dependent on agricultural imports, with a food self-sufficiency rate of merely 40 percent. Yet, the country has long taken the issue of protecting farmers and agriculture most gravely, no matter how the national economy is performing. Starting at the end of World War II, the Japanese government regulated strict control over the distribution and prices of major farming products like rice, and undertook a policy that gradually opened up agricultural trade to foreign markets, aiming to reduce detrimental domestic competition and suppress foreign imports.

More importantly, the Japanese government has long provided colossal subsidies to its agricultural industries. Way back in 1971, the government issued 463.3 billion yen to regulate rice prices alone and, since the 1980s, it has continued to apportion an average of 4 trillion yen to the agricultural sector every year. In 1985, the government dedicated 5.1 percent of its fiscal budget to agricultural expenses, a good sum of money equivalent to 22.8 percent of the agricultural gross production that year. Statistics reveal that the Japanese allocated about $3,720 in their budget for every hectare of farmland, which was about 9.1 times as much as what the Americans gave, 4 times the French, 5.7 times the British and 4 times the Germans. During the '90s, if the average Japanese shouldered $100 of agricultural budgetary expenses, his American, French, British and German counterparts shouldered $84, $134, $61 and $79 respecively. More recently, in 2000, Japan handed out 6.4 trillion yen to the agricultural sector, about 1.3 percent of its GDP. That year, the gross product of that sector was 9.12 trillion yen, which means the agricultural subsidy rate was as high as 70 percent. Among major developed countries, Japan has the second-highest average agricultural budget expense per person, behind France.

The Japanese are not afraid to anger America or Europe to protect their farming industry. Even they had a hard time with fellow WTO members, who weren’t happy that Japan blocked foreign agricultural products from entering Japan through rigid tariffs and technological barriers. Their economy has certainly benefited from these harsh stances. While less than 10 percent of the Japanese workforce participate in the agricultural sector, most farmers’ incomes come from their supplementary jobs, as farming only contributes less than 20 percent of their incomes. Now the average farming family earns 1.3 times as much as the average worker.

After a quick look at historical accounts of Japanese and American experiences with agricultural protection, we might be able to understand why Chinese farmers aren’t earning more even though the prices of farm products have gone up (and induced inflation). Despite recent enhancements to agricultural investments and subsidies, due to historical circumstances and the restrictions of reality, our country still faces relatively inferior infrastructure in agriculture. The level of our agricultural commercialization, intensification, industrialization and adoption of technology is considerably low. Our farmers aren’t motivated enough to organize themselves, and our government is weak in agricultural financial and insurance support, distribution and information services, and circulation system reform. The result is that the benefits from the climb in food and farm prices is eaten by the distribution unit or is offset by mounting raw material prices.

In their courses of development, countries like America and Japan have not only learned from a strategic standpoint how fundamental agriculture is to their nation’s economic and social development, they have also learned to secure the benefits of farmers and support for agriculture in changing times, especially during inflation. In the end, their agricultural industries have achieved consistent, steady development, not to mention eventual modernization. Farmers in these countries now enjoy a steady income growth and have become relatively independent of farming income. Rural areas have accomplished urbanization. There is no doubt that these successful experiences are of great value to a developing country like China, with a great agricultural population but weak agricultural infrastructure.