CPEC and the opportunity for agriculture

China is the world’s largest importer of agricultural products. In 2015, China imported $160 billion worth of agricultural products. However, Pakistan’s share in these exports was minuscule — less than half a percentage point — despite having a large agrarian base and a shared border with China.

With a population of 1.3 billion people, China consumes almost $1 trillion worth of food every year. With increased urbanisation and rising incomes, Chinese consumption patterns are also changing, and demand for high quality imported food items is growing at a pace much faster than population growth. Therefore, the domestic consumption is expected to grow by another $500 billion in the next 10 years. According to Bloomberg, it takes about one acre of arable land to feed an average US consumer. With present population, China only has about 0.2 acre per citizen, which is going to be far short of future requirements, considering the evolving demand.

The world is therefore keenly focusing on China, with international conglomerates and food giants making long-term China plans. They expect the country is going to be the biggest growth driver in future.

The US, Brazil and Australia increased their agriculture exports to China 3+ times over the last decade. Other countries are following suit. Russia had been eyeing China’s agri-products market for long and recently, secured access after the two countries reached an agreement on quarantine inspection requirements and food safety standards for exporting wheat, maize, rice, soybean and rapeseed. Russia has now replaced the US as the world’s largest wheat exporter.

China, the world’s largest importer of vegetables, gets 50 of these imports from the US and Brazil. In the world of international trade, shorter distances can provide a strategic advantage through lower transportation costs. But for perishable items like food, such proximity can translate into yet another edge. During transit over long distances, food items face higher risk of spoilage and contamination. Because of this, not only additional cost is incurred for preservation and packaging but often exporters have to make use of extra pesticides to increase shelf-life of food. Pakistan, being China’s neighbour, therefore enjoys a unique advantage and CPEC provides an unprecedented opportunity to capitalise on that.

Agricultural development is one of the seven areas of cooperation under CPEC, wherein China is specifically interested to explore areas like cotton productivity, efficient irrigation and post-harvest infrastructure along the CPEC route. However, Pakistan’s agriculture sector priorities vis-à-vis CPEC remain unclear. CPEC provides Pakistan a godsend to enhance its agriculture exports to China. This attractive opportunity is what should drive the CPEC agenda for agriculture from the Pakistani side.

This, however, would require concerted efforts by the government and private sector. The government’s primary role should be to remove tariff and non-tariff barriers for agricultural trade with China. CPEC has set the stage to renegotiate Pak-China Free Trade Agreement and Islamabad should demand better tariffs for its agricultural exports. Furthermore, there is a need to rationalise sanitary and phytosanitary (SPS) restrictions, food and safety inspection requirements and standards. The private sector and agri-entrepreneurs should become the trailblazer and start exploring viable market opportunities in the Chinese market and forge partnerships with international firms to get a foothold. The government and private sector should jointly invest in research and development and post-harvest technology to improve product variety and quality. Last, but not the least, value chain expansion should be prioritised. Fruit processing, for instance, can fetch greater value with far simpler SPS requirements and more stable demand.

Pakistan’s trade balance has already taken a nosedive. We need to work on enhancing our exports rather than waiting for FDI and remittances to compensate for our trade deficit. Just hoping that CPEC by itself will make the problem disappear is not going to help.

Published in The Express Tribune, August 3^rd, 2017.

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