Branstad: U.S.-China trade deal must be significant, meaningful, enforceable03/28/2019 | Soybean Exports, Policy, Economics
By Aaron Putze, APR, ISA communications director
Trade that works takes work, especially when it involves the world’s two largest economies, says Iowa’s former governor and now head of America’s embassy in China.
Terry Branstad, meeting with Iowa soybean farmers this week in Beijing, struck an optimistic tone when pressed on the prospects of a trade agreement being ironed out yet this spring with the U.S. soybean industry’s most important trading partner.
“Under President Trump’s leadership, the United States is working towards a fair and reciprocal trade relationship with China,” he said. “We want a results-oriented, constructive, bilateral relationship based on fairness and reciprocity.”
Cooperation and tension
Branstad has hosted Chinese President Xi Jinping twice in Iowa while governor — once in 1985 as an agriculture providential official from Hebei Province and again in 2012 when he had ascended to power in China. Branstad said the relationship between the two countries includes areas of cooperation and of tension.
But the administration remains focused on working with China “to address trade imbalances, threats to U.S. and regional security, and global challenges,” Branstad added.
A resolution can’t come quick enough for those who derive their livelihood from the growing, trading and processing of soybeans.
For U.S. farmers, the prospect of breaking even this year on a crop they haven’t yet planted is growing dimmer.
Burgeoning global supplies aided by a healthy South American soybean crop currently being harvested and reports that as much as 13 percent of China’s hog herd — a number equivalent to nearly twice Iowa’s annual production — has contracted African Swine Fever is sending futures prices on the Chicago Board of Trade lower.
The Iowa Soybean Association delegation, led by President Lindsay Greiner of Keota and Vice President Tim Bardole of Rippey, were told tariffs on U.S. soybean imports is equally painful for China soybean buyers and processors.
Reducing potential suppliers via artificial trade distortions means the laws of supply and demand are no longer applicable. Instead, those needing soybeans — like China Sea Grains and Oils Group based in Shanghai — must pay a higher price for every bushel they buy.
“Politics are no replacement for supply and demand,” said China Seas Chairman Zhao Long in conversations today at the company’s Shanghai headquarters. “Tariffs are making it difficult on Chinese business because they can’t expect, plan and prepare. Trade discussions are all talk.
“I want a deal to be made, too, but I’m not optimistic,” he said.
Adding to the misery for most Chinese soybean buyers are disputes between Beijing and Canada involving canola and the ability for only the state-owned grain reserve and country’s largest food and agricultural provider to buy U.S. soybeans. This arrangement gives them the ability to source and sell soybeans and soybean meal more competitively than private enterprises operating throughout China, including China Seas.
The U.S.-China trade dispute, which has continued for almost nine months, is also motivating China companies to invest heavily in Brazilian infrastructure.
China Seas, whose portfolio includes major holdings in logistics, oil storage and real estate, is currently constructing a $700 million port in northeast Brazil. The facility will expedite the loading and transfer of soybeans from key South American growing regions directly to China.
Controlling the source of soybeans and grain, says the Chinese government, provides the country greater control and pricing power enhancing its national security.
Back in Beijing, Branstad said a new trading relationship between the U.S. and China bodes well for the nation’s farmers.
“We look forward to increased sales of all food and agricultural products in China,” he said. “Ultimately, American farmers will be able to significantly increase food and agricultural exports if China cuts its tariffs and removes its non-tariffs barriers.”
Branstad affirmed the importance of the U.S.-China economic relationship and said the Trump Administration is committed to reaching “meaningful, fully-enforceable commitments to resolve structural issues and addressing our persistent trade deficit to improve trade between our countries.
“The U.S. trade negotiators have been working long and hard to secure an agreement that’s significant, meaningful, long-lasting and enforceable,” he said.
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