(Aug. 30) China’s entry into the World Trade Organization will make it vulnerable to international competition in the grains sector but may accelerate its emergence as an export power for fresh apples and pears.

Desmond O’Rourke, president of Belrose Inc., Pullman, Wash., gave a presentation Aug. 23 on China’s accession to the WTO and its impact on world trade at the U.S Apple Association Outlook and Marketing Conference in Chicago.

O’Rourke gave an overview of China’s 25-year effort to liberalize its economy and bring the country into the mainstream of international trade. He said China had begun to allow capitalist enterprises in China since 1977 and has encouraged investment in the country. New enterprises have exploited China’s cheap labor pool to make it a world leader in the manufacture of clothing, electronics and other goods.

The investments have spurred great economic gains in China. Per capita income averaged a 9.2% gain throughout the 1990s. Still, by 2000 the average income in China was only $840.

Even so, O’Rourke said a growing middle class in southern China has led to the development of supermarkets.

Agricultural enterprises also were liberalized in 1977, leading many growers to abandon grains in favor of producing fruits, vegetables, aquaculture and other specialty crops. Pent up demand for fruit allowed the season average prices for apples to triple between 1985 and 1994.

Production of apples increased by 662% between 1980 and 2000, to 23 million tons.

By the mid-1990s, apple prices began to slide and orchard costs started to increase for apple growers. By 2000-01, prices for Chinese apples were about half of 1994 levels.

The Chinese government has not bailed out its fruit producers, but has encouraged farmers to seek new markets through processing, storage and export.

O’Rourke said China is vulnerable to grain imports from the U.S., Canada and Australia. However, he said many researchers feel that China’s labor intensive crops like fruits and vegetables will have a competitive advantage in world markets.

That has begun to show itself in export statistics. For example, Chinese fresh apple exports in 2000-01 were 396,000 tons, more than three times the level of the mid-1990s. U.S. fresh apple exports in 2001 totaled 760,000 tons.

China’s share of apple imports in Southeast Asia has soared from 6.1% in 1994 to 47.6% in 2000. At the same time, the U.S. market share has dropped from 49% to 24.8%. Growth in apple juice concentrate exports has been even more explosive, rising from 220,000 tons in 1995 to 275,000 tons in 2001. U.S. apple juice exports in 2001 totaled just 27,900 tons.

O’Rourke said that many are concerned whether China will expose its own industries to international competition. However, he said it is likely China will continue to liberalize its economy, if reluctantly.

China will push for liberalization of trade in industrial products, but may take a protectionist attitude toward agricultural liberalization, much like South Korea, he said.

For U.S. exporters, O’Rourke said there would be opportunities for premium fruit.

But he gave little encouragement that China will become a large market for U.S. apples.

“There should be a growing niche for off-season apples,” he said.