After China's accession to the World Trade Organization (WTO), there is a substantial increase in China's foreign trade volume. Specifically in just 5 months since then, China's gross imports and exports have increased by 12.1%, reaching $221.5 billion where imports account for 48% (Money China, 2002). With the leading role of the WTO, China has signed a number of bilateral agreements on trade relations with numerous countries such as New Zealand and Australia on a mutually beneficial basis. In such case, imported products from these countries would have comparative advantages in the Chinese market comparing to those from countries without signing bilateral agreements with China. For example, milk from New Zealand enjoys the Most-favoured-nation tariff rate which is only 5% in 2013, while the rate on milk from the United States is as high as 40% (Wu, 2012). However, the bilateral agreements might create a monopoly situation in some industries to a large extent. In case of the existence of a monopoly, the Chinese government is considering to enact new foreign trade policies targeting to the import products from those less explored countries in order to ensure a fair competition environment.
In this report, we will only analyse the milk industry. Particularly, in order to improve profitability of Chinese companies importing milk from Poland, we have evaluated the barriers which Chinese importers face; then put forward several solutions and evaluate them respectively based on the criteria of time, feasibility, efficiency and acceptability; finally conclude the relative appropriate solution.
Our goal the government plans to achieve is to acquire higher market share of Poland milk in China market. To get larger market share, combined with the national and international business environment, we find that there are mainly three barriers that we have to tackle with. The first one is that after Chinese government signed FTA (free trade agreement) with New Zealand and Australia, the milk market of China is dominated by these two countries, especially for New Zealand. As a result, Poland milk and other EU countries may face fierce competition with these two countries. The second obstacle is that due to a series of dairy products scandals happened in China recent years, such as Sanlu Poisonous Milk Powder and the milk powder contamination of New Zealand’s Fonterra, China has introduced stricter regulations on the dairy products both overseas and domestically. In 2013, AQSIQ (Administration of Quality Supervision, Inspection & Quarantine) released the Announcement No. 53 and No. 62, which states that overseas dairy products are required to be in line with China’s food safety standards and requirement. Meanwhile, overseas producers also need to submit testing reports for China’s food safety standards. Thus, the complex process of required documents preparation is very time-consuming. It may be a barrier for both importer and dairy producers. The third and the last barrier we want to introduce is the awareness of Poland milk is not enough. As a new entrant to milk market, Poland milk is not that well-known as the incumbent brands that came from New Zealand and Australia. Thus, to get through these obstacles, we also came up with three alternative solutions for Chinese government to take actions.
Solution 1 ：
One solution can be recommended for Chinese government to improve the market share of Poland milk is to sign up bilateral FTA (free trade agreement) with EU which can further reduce or eliminate trade barrier such as tariff, import quota and overly strict regulations on the prerequisite of WTO rules. The imported milk from Poland and other EU countries has been faced with the vigorous competition from New Zealand and Australia. This is mainly due to New Zealand and Australia both signed FTA with China, which significantly help them capture the Chinese market. Especially, the NZ China