China's Accession Into The World Trade Organization
Because 80 percent of all ammonia is used to make fertilizer, the market for ammonia is directly tied to the market for fertilizers on a global scale. China has historically been the world's largest importer of nitrogen fertilizers, accounting for as much as 40% of total world imports. As a result, Chinese imports have had a direct and significant impact on both world and U.S. prices. China is currently banning the importation of fertilizers from the United States. If China's market were opened to American fertilizer products, the demand for ammonia produced in Louisiana would increase substantially much to the benefit the companies who manufacture ammonia here.

China and the United States reached a general agreement on November 15 that would allow China's entry to the World Trade Organization (WTO), a deal that could open a market of 1.2 billion consumers to U.S. firms. Government control over fertilizer imports into China through the use of quotas, licenses and other trade barriers has significantly affected the U.S. fertilizer industry. The current Chinese ban on fertilizer imports is one of the primary reasons for current downturn in the world fertilizer market.

An equitable fertilizer agreement between the two countries not only raises the prospects for a short-term rebound in fertilizers, but would also set the stage for positive long-term growth in both the nitrogen and phosphate fertilizer sectors. The agreement currently contains the following provisions that are positive for the fertilizer industry:

• Full distribution rights in five years with no phase-in; which would allow American companies to sell fertilizer products to Chinese farmers as a private entity without a Chinese middle-man;
• Elimination of the quota restrictions and licensing requirements for fertilizer products within two years;
• A cap on tariffs at 6.5 percent.

However, the agreement as currently worded will not have the immediate impact that had been expected based on earlier negotiations. Specifically, full trading rights(the right for U.S. companies to sell product directly to Chinese fertilizer dealers( has been omitted from the current agreement, which means that Chinese monopolies can still artificially limit the amount of fertilizer Chinese farmers purchase. Efforts are underway in Washington and abroad to correct this deficiency before the two countries sign a final Memorandum of Understanding.

LAP Position:
Ongoing negotiations between China and the United States on China's accession to the WTO could prove to be extremely positive for the U.S. fertilizer industry. Integration of China into the world community, rather than isolation, is the correct course of action. However, LAP continues to work towards ensuring that a final agreement between China and the U.S. includes full trading rights or some other equitable market access pact. LAP continues to work with industry representatives to encourage the Clinton administration and the U.S. Trade Representative's office to fine-tune the agreement to ensure that our members have full access to the Chinese fertilizer market.