Soy­beans up­stage trade talks

South Florida Sun-Sentinel (Sunday) - - People On The Move - By Paul Wise­man

WASH­ING­TON — Soy­beans ac­count for less than 1 per­cent of all the goods and ser­vices the United States sells the rest of the world.

But some­how the hum­ble legumes are up­stag­ing weight­ier, thornier is­sues as the Trump ad­min­is­tra­tion tack­les trade dis­putes with China, the Eu­ro­pean Union and other trad­ing part­ners. Crit­ics worry that fo­cus­ing on get­ting for­eign­ers to buy soy­beans and other U.S. goods is a dis­trac­tion from push­ing them to make deeper eco­nomic re­forms that would of­fer longer-last­ing ben­e­fits to the United States.

The out­size im­por­tance of soy­beans — mostly used as an­i­mal feed but also con­sumed by hu­mans in ev­ery­thing from Gen­eral Tso’s Tofu to soy lat­tes — was ap­par­ent again re­cently in two days of U.S.China trade talks.

The world’s two big­gest economies didn’t make much progress on their dif­fer­ences over the ag­gres­sive tac­tics, in­clud­ing cy­bertheft, that Bei­jing is al­legedly us­ing to chal­lenge U.S. supremacy in cut­tingedge in­dus­tries like driver­less cars and ar­ti­fi­cial in­tel­li­gence.

But to the pres­i­dent’s de­light, they agreed on one thing: In an un­ex­pected deal that even sur­prised the top U.S. trade ne­go­tia­tor, China said that it would buy 5 mil­lion met­ric tons of Amer­i­can soy­beans over an un­spec­i­fied pe­riod.

“China as a sign of good­will has agreed to pur­chase a tremen­dous, mas­sive amount of soy­beans,” Trump told re­porters.

He said he had con­sulted with Agri­cul­ture Sec­re­tary Sonny Per­due and learned that “our farm­ers are ex­tremely happy.”

“It’s a nice kind of olive branch,” said Peter Meyer, head of grain and oilseed an­a­lyt­ics at S&P Global Platts.

Soy­beans, which ac­counted for just $21.5 bil­lion of $2.4 tril­lion in U.S. ex­ports in 2017, seem to be punch­ing above their weight in U.S. trade pol­icy.

Farm­ing is one of the few ar­eas in which the United States sells more to the rest of the world than it buys, China in­cluded. Pow­er­ful lob­bies rep­re­sent Amer­i­can agri­cul­tural in­ter­ests in Wash­ing­ton. And farm­ers tend to be en­thu­si­as­tic Trump sup­port­ers.

The em­pha­sis on soy­beans has draw­backs, crit­ics say. In the con­fronta­tion with China, for ex­am­ple, it di­verts at­ten­tion from the tough tech is­sues that di­vide the world’s two big­gest economies and may de­cide whether Bei­jing or Wash­ing­ton pre­sides over the econ­omy of the fu­ture. And it im­plies that the Chi­nese might be able to avoid sub­stan­tive con­ces­sions on their eco­nomic poli­cies sim­ply by agree­ing to buy more Amer­i­can prod­ucts and putting a dent in the mas­sive U.S. trade deficit with China. That amounted to $336 bil­lion in 2017 and was likely higher last year.

“There’s con­fu­sion about what the ad­min­is­tra­tion’s ob­jec­tives are,” said Ru­fus Yerxa, pres­i­dent of the Na­tional For­eign Trade Coun­cil and a for­mer U.S. trade of­fi­cial.

In a let­ter last week, Se­nate Mi­nor­ity Leader Chuck Schumer of New York and fel­low Demo­cratic Sens. Ron Wy­den of Ore­gon and Sher­rod Brown of Ohio warned Trea­sury Sec­re­tary Steven Mnuchin that any deal with China should force Bei­jing to end the abu­sive prac­tices that put U.S. tech firms at a com­pet­i­tive dis­ad­van­tage and to en­act fun­da­men­tal eco­nomic re­forms that would make the Chi­nese mar­ket more ac­ces­si­ble to U.S. and other for­eign firms.

An agree­ment that set­tles for Chi­nese pur­chases of Amer­i­can goods, in­tended to nar­row the trade deficit, would be viewed on Capi­tol Hill as “an ab­ject fail­ure,” they wrote.

Soy­beans took a prom­i­nent place in pre­vi­ous Trump ad­min­is­tra­tion trade talks. The United States and the Eu­ro­pean Union at least tem­po­rar­ily backed away from a po­ten­tial trade war over cars last July when the Euro­peans agreed, among other things, to load up on Amer­i­can soy­beans.

Amer­ica’s trad­ing part­ners are well aware of the out­size in­flu­ence farm­ers en­joy in Wash­ing­ton. When Trump last year started slap­ping im­port taxes on Chi­nese goods and on for­eign steel and alu­minum, they tar­geted their re­tal­i­a­tion on the Amer­i­can Heart­land, im­pos­ing tar­iffs on soy­beans and other farm prod­ucts.

China’s soy­bean tar­iffs had a dev­as­tat­ing ef­fect. Be­fore the trade hos­til­i­ties erupted last year, China bought nearly 60 per­cent of the soy­beans the United States ex­ported. Then the tar­iffs kicked in: In the first 10 months of 2018, U.S. soy­bean ex­ports to China dropped to 8.2 mil­lion met­ric tons from 21.4 mil­lion met­ric tons a year ear­lier — a 62 per­cent freefall, ac­cord­ing to the U.S. Depart­ment of Agri­cul­ture.

The back­log of un­sold soy­beans also pushed down U.S. prices, spread­ing more pain in farm coun­try.

“We need some good news,” said Blake Hurst, a soy­bean and corn farmer in north­west­ern Mis­souri’s Atchi­son County and pres­i­dent of the Mis­souri Farm Bureau.

So Hurst and other farm­ers wel­comed China’s de­ci­sion to buy Amer­i­can beans. But their re­lief is limited. Hurst wor­ries it’s a one-time pur­chase and not the re­sump­tion of busi­ness as usual.

China bought 31.7 mil­lion met­ric tons of Amer­i­can soy­beans in 2017 and 36.1 mil­lion in 2016. Five mil­lion met­ric tons doesn’t do much to fill the gap.

“It’s still woe­fully short of what they used to do,” said Ron Moore, who grows corn and soy­beans in Ro­seville, Ill., and serves as chair­man of the Amer­i­can Soy­bean As­so­ci­a­tion. “We’re not there yet.”

Even af­ter U.S.-China trade ten­sions ease, soy­bean in­dus­try con­sul­tant John Baize said it might be a good idea for the U.S. and China to scale back their soy­bean trade. The eco­nomic and geopo­lit­i­cal ri­vals are likely clash again over is­sues such as trade, Tai­wan and Chi­nese ter­ri­to­rial claims in the South China Sea. Soy­beans could once again be held hostage.

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