Tap­ping the po­ten­tial of China-US farm trade

The Jakarta Post - - OPINION - Chen Wei­hua The writer is deputy edi­tor of China Daily (US edi­tion).

My discovery on a trip last week to Boze­man, Mon­tana, was not the Yel­low­stone Na­tional Park nearby, but the huge po­ten­tial for China-United States agri­cul­tural trade and co­op­er­a­tion. It was also a feel­ing Mon­tana ranch­ers and farm­ers shared at an agri­cul­tural fo­rum with Chi­nese Em­bassy of­fi­cials and busi­ness lead­ers in the back­yard of Mor­gan Ranch House.

The host, Craig Mor­gan, was ex­cited about the prospect that qual­ity feeder cat­tle raised on his open coun­try ranch may fi­nally end up on Chi­nese din­ner ta­bles af­ter China lifted a 14-year ban on the im­port of beef from the United States.

As the world’s sec­ond-largest beef im­porter, China im­ported about US$2.5 bil­lion worth of beef last year. Still, the per capita beef con­sump­tion in China is only 5 kilo­grams a year com­pared with the world av­er­age of 10 kg. So if China’s per capita beef con­sump­tion in­creases to 10 kg, it will need an ad­di­tional 6.5 mil­lion tons of beef a year to meet the de­mand.

The fast-grow­ing mid­dle-in­come group in China, es­ti­mated at 300 mil­lion — al­most equal to the US’ pop­u­la­tion — is crav­ing for qual­ity food prod­ucts from the US and other coun­tries, a crav­ing fur­ther fu­elled by food safety con­cerns in China in re­cent years.

Those rep­re­sent­ing Mon­tana farms, as in other US agri­cul­tural states, are al­ready reap­ing the ben­e­fits of the ris­ing de­mands in China, as it was the top des­ti­na­tion for US agri­cul­tural ex­ports last year, with a to­tal value of $21.4 bil­lion. The tra­jec­tory looks en­cour­ag­ing as the ex­port of US agri­cul­tural goods to China grew 219 per­cent from 2006 to last year.

“Cul­ti­vat­ing Op­por­tu­nity: The Ben­e­fits of In­creased US-China Agri­cul­tural Trade,” a US Cham­ber of Com­merce re­port re­leased last Novem­ber, pre­dicted an ad­di­tional cu­mu­la­tive gain of $28 bil­lion in bi­lat­eral agri­cul­tural trade in the 2016-2025 pe­riod if the two sides re­duce or re­move some of their tar­iff and non-tar­iff bar­ri­ers.

The US, as an ad­vanced econ­omy, has much to of­fer in mod­ern­iz­ing China’s agri­cul­tural sec­tor. It means big busi­ness for US agri­cul­tural machin­ery and ex­per­tise. That is why US Se­na­tor Steve Daines from Mon­tana is strongly op­posed to even the idea of a trade war be­tween the two coun­tries, which he be­lieves will cause US farm­ers and ranch­ers the max­i­mum loss.

The mood out­side Wash­ing­ton is of­ten dif­fer­ent. At the Mon­tana fo­rum, farm­ers and ranch­ers dis­cussed with Chi­nese par­tic­i­pants how to ex­pand prac­ti­cal co­op­er­a­tion, pro­mote Mon­tana beef in China and es­tab­lish joint food pro­cess­ing ven­tures.

US pro­vin­cial and lo­cal lead­ers, such as gov­er­nors and may­ors, have al­ways been in­ter­ested in ex­pand­ing prac­ti­cal co­op­er­a­tion with China, in sharp con­trast to many politi­cians in Wash­ing­ton.

A US-China Busi­ness Coun­cil re­port re­leased on Sept. 7 showed that 432 of the to­tal 435 US con­gres­sional districts have seen triple-digit growth in the ex­port of goods and ser­vices to China since 2006.

China was among the top three goods-ex­port mar­kets for 263 districts last year, and among the top five for 358 districts. It was also the top ser­vices-ex­port mar­ket for 93 con­gres­sional districts in 2015 and among the top five mar­kets for 399 districts.

Out­side Wash­ing­ton, it’s all about down-to-earth busi­ness with­out even a hint of pol­i­tics. In Wash­ing­ton, in con­trast, Pres­i­dent Don­ald Trump’s ad­min­is­tra­tion launched an in­ves­ti­ga­tion un­der Sec­tion 301 of the US Trade Law of 1974 into China’s in­tel­lec­tual prop­erty law and prac­tices last month and threat­ened re­cently — af­ter the Demo­cratic Peo­ple’s Repub­lic of Korea con­ducted its sixth nu­clear test — to stop trad­ing with any coun­try that con­tin­ues to have trade ties the DPRK, trig­ger­ing fears of a trade war be­tween the world’s two largest economies.

Trump has also blamed other coun­tries, no­tably China, for the US’ trade deficits. But the US had a sur­plus in agri­cul­tural trade with China, about $17 bil­lion, last year ac­cord­ing to the US Trade Rep­re­sen­ta­tive.

And this sur­plus looks set to ex­pand fur­ther as an in­creas­ing num­ber of Chi­nese can af­ford to pay for high-qual­ity farm prod­ucts from the US.

Un­like the Trump ad­min­is­tra­tion, Chi­nese lead­ers are not ob­sessed with such agri­cul­tural trade deficits. Many lead­ing US econ­o­mists be­lieve deficits in bi­lat­eral trade do not mat­ter, and the US’ trade deficit has vir­tu­ally noth­ing to do with the US’ trade pol­icy, but its fis­cal pol­icy, low sav­ings rate and the role of US dol­lar as a re­serve cur­rency.

While there is huge po­ten­tial for ris­ing US agri­cul­tural ex­ports to China, Wash­ing­ton should not take it for granted the po­ten­tial would con­tinue to ex­ist. As the world’s largest agri­cul­tural im­porter, China has also be­come a ma­jor agri­cul­tural ex­port mar­ket for coun­tries such as Brazil, Ukraine, Aus­tralia and Ar­gentina, strong com­peti­tors for US farm ex­ports.

China’s im­port mar­ket would fur­ther diver­sify if the US gov­ern­ment con­tin­ues to use the out­dated Sec­tion 301 to launch in­ves­ti­ga­tions against China and threaten to dis­rupt bi­lat­eral trade, by link­ing it with the sit­u­a­tion on the Korean Penin­sula.

China and the US are like great nat­u­ral part­ners for agri­cul­tural trade and co­op­er­a­tion, and no one should spoil that equa­tion.

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