Agricultural Trade between China and the Greater Mekong Subregion Countries: A Value Chain Analysis

John Walsh

Although its overall importance to national economies may have declined in recent years, agriculture remains of considerable significance to the countries of the Greater Mekong Subregion (GMS) (i.e., Cambodia, Laos, Myanmar, Thailand and Vietnam). This is not just because of the direct effects of employment and income generation but also because farming represents a vital reminder of the foundation of society for which most if not all people have an important attachment. This is not just sentimentality but it has a very practical significance in countries where people remember being hungry. Young people might not realise the possibility, although food insecurity in Myanmar is intensifying, but most of the leadership of, for example, Vietnam spent formative years anxious about being able to eat properly. It is not surprising, then, that they are reluctant to open up the food production and distribution sectors to too much foreign competition for fear of returning to the days of hunger. Given that most of the countries covered by the GMS suffer from lack of transportation and other infrastructure, as well as heightened inequality of incomes, it is not surprising that the agricultural sectors tend to lag behind industrial sectors, where foreign investment has been mostly welcomed for some years. As Jayant Menon observes in an introductory chapter, “poverty remains a largely rural phenomenon in GMS countries” (p. 2).

One of the principal means by which these less developed but still important sectors can be improved, in terms of productivity and income generation, is through trade. Given geographical and historical conditions, north-south relationships are much more important in GMS countries than east-west ones. Most countries can supply food for their own people – sometimes with some apparent contradictions. I remember enduring a fairly chilly Hanoi winter when I could still buy fresh mango from the south of the country and, on my last visit to Cambodia, several years ago, the markets in Phnom Penh were full of Thai and Vietnamese produce. Countries can also grow surpluses, at least in some goods, and these can be traded internationally. This essentially means exporting to China, and this is the subject of this book (and would, perhaps, have made for a better title than the reference to trade, which suggests a two-way movement of goods which is not addressed at all here).

Exporting to China has become more possible as new routes are opened and both importers and exporters have gained more experience in dealing with the necessary transactions. Certain factors indicate that it will continue to grow: “Population growth, along with changes in the population structure, increasing income, growing urbanization, and shifts in dietary structure, are expected to increase demand for fruits, vegetables, meat products, special grains and food grain” (p. 6). It is appropriate, then, to consider this trade and what significance it has for those involved.

The method chosen for analysis is the value chain approach. This is quite a common approach in the study of international business and it derives from the work of Michael Porter.[i] The idea is to recognize that production of any good requires a number of different stages. For example, before the coffee is served to the customer in the café, the beans must be grown, roasted, processed into usable form, branded and packaged, distributed to wholesalers and then to retailers. At each of these different stages, it is possible to identify the cost of the product at the start of the stage and the price of it at the end. Initially, the approach was used by individual companies to decide whether they should conduct the stage concerned in-house or whether it should be contracted out or bought in at the market price. However, it soon became apparent that value chain analysis (VCA) is a useful technique for examining the state of an industry overall and to identify the various actors involved, what they do and how well they do it, which is a structure-conduct-performance activity. In this case, there are two main aspects to the analysis. The first part is the mapping of activities of each stage and identification of the changes in value as the products are processed from growth to receipt in China. The second part is to identify any non-tariff measures (NTMs) that interrupt or hinder the trade. Owing to sensibilities about food security and the need to protect home farmers, many if not all governments have put restrictions on both the inward and outward passage of agricultural products across their borders. The most obvious means of doing this is to impose a tax or tariff. However, tariffs have become less commonly used in recent years as increased production of goods has helped to alleviate concerns about food security and as countries have come to abide by international trade protocols monitored by the World Trade Organization (which China joined in 2001 and Laos was the last GMS country to join in 2013).

NTMs are used to regulate trade in place of tariffs. Depending on viewpoint, they may be seen as necessary regulations to protect domestic consumers or illegitimate forms of protectionism (or somewhere in-between). EU countries reject chlorine-washed chicken from the US, which US consumers eat in large amounts. The significance of this NTM, like many others, is subject to contestation and its future may be determined on political rather than scientific grounds. Chinese NTMs are seen in a similar light (the reverse situation is not considered, as mentioned above). Of course, the situation is complicated because of the lack of transparency involved with the ways that much of the export trade going into China is handled by officials. In any case, the NTMs are itemized in the second part of the VCA.

After the introductory chapter and another considering structural changes in China that affect demand for agricultural products, the bulk of the book is occupied by the five country case studies, some of which are quite lengthy pieces of work accompanied by numerous charts and graphs. The problem with the country-by-country approach is that each one goes through a quite similar justification and explanation of the analytical approach employed and then description of the research methods used. These are the same in each case: first, products are selected for analysis on the basis that a surplus is produced for export and future growth in trade is possible (this involves cassava and durian in Thailand, cassava and sugarcane in Cambodia, rice and Cavendish banana in Laos, maize in Myanmar and dragon fruit and coffee in Vietnam). Then, suitable production areas are identified and then a programme of personal interviews with relevant actors is completed. If this book were intended for a wide, more general audience, it might have been better to have written thematic chapters and tucked the methodological details away somewhere less conspicuous.

When it comes to the findings and their analysis, it is not surprising that certain issues are prominent in different countries. These include the monopsony power of Chinese buyers, which is particularly noticeable in those cases in which Chinese investors have taken over production management in the GMS country involved and local people provide labour and some location-specific knowledge. Other issues surround the low level of productivity and infrastructure. A particular problem relates to hygiene and phytosanitary standards. Only Thailand among GMS countries has a functioning system that Thai farmers can use to register their products as compliant with Chinese NTMs. Farmers elsewhere find it expensive to access the Thai system or, as in the case of Vietnam, find that its systems are not properly maintained with up-to-date information. There is also the issue of lack of market information which means growers have little idea of where their products will go or how they will be valued there and so are obliged to take the role of price-takers, which is a take it or leave it offer from the buyer.

When it comes to possible solutions to the problems identified, there is a tendency to try to avoid very specific local conditions by resorting to consultant forms of discourse. Hence, there is a need to ‘improve human capital’ but no real indication of how that is to take place, who will be responsible for it and how it will be funded. Nearly all solutions are strictly national in scale and there is little or no sense that cross-border organizations such as the Food and Agriculture Organization of the United Nations or the GMS Secretariat might be able to play a role.

Data reported are now a couple of years old, which is unavoidable for a publication of this sort which has organized research teams to do the work on what is presumably an academic timescale. It does mean some relevant and predictable events are not addressed, such as the opening of the Boten-Vientiane (Chian-Laos) high-speed railway, which greatly reduces the time necessary for exporting goods and which will, one day, be extended to Bangkok and beyond (ultimately Kunming-Singapore). I would also liked to have seen a brief concluding chapter summarizing the state of knowledge and proposing a future research agenda based on the findings reported in the book. Nevertheless, this is a sold body of work, which sheds light on the current situation of agricultural exports from the GMS to China. It will be of use to policy-makers and specialists in this area and, also, probably to companies looking for new markets for their various extension-type services.


[i] Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: Free Press.