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The Chinese situation: Questions but few new answers

Free Market Reflections with Steve Dittmer

The new administration down here started off with a rush. Incoming President Biden early issued a record number of executive orders (50+), nominated and got confirmed a few top officials and then everything else stalled while Congress wrangled over a $1.9 trillion (yes, that’s a T) supposed COVID-relief bill that mostly wasn’t. Clear messages were percolating out that climate change and open southern borders were going to be priorities. Energy independence wasn’t.

Tellingly, an advocate for using anti-trust law and government mandates to break up bigger agribusiness companies such as packers, seed companies, etc., was appointed as manager of the Economic Policy team. Interestingly he is a lawyer, not an economist.

Getting into March, there was no U.S. Trade Representative (USTR) confirmed and President Biden’s foreign and trade policy was not well defined. He has made comments indicating he would be tough on China. But given the federal tax investigation into his son’s business dealings with China, we take that tough talk with a gunny sack of salt.

Meanwhile, tariffs on some $350 billion worth of trade from China are still in effect. China has been busy buying corn, beans and pork from us in recent months. We know they are experiencing some recurrence of African swine fever in rebuilding swine herds but with China, no one really knows. Many assume they are having more trouble than they are letting on. But they are buying grain to feed to something.

Overall, U.S. beef exports began rebounding in the second half of 2020, then took off in November and December. November equalled 2019 and December broke all past records. The shift from foodservice to retail pretty much held all over the world.

The March 2020 U.S.-China Phase One agreement made a much larger percentage of U.S. beef eligible for the rapidly growing Chinese market. According to U.S. Meat Export Federation statistics, the U.S. industry began capitalizing, with exports quadrupling year-over-year to a record 42,813 MT, valued at $310.2 million (up 260 per cent). Since September, the U.S. has surpassed Australia as the largest supplier of grain-beef to China.

Of course, that tonnage total is far behind that of Japan (14 per cent) and South Korea (17 per cent), but major growth from little or nothing not long ago.

Katherine Tai had a March confirmation hearing in committee for U.S. Trade Representative and got support from both parties. The U.S. Meat Export Federation and NCBA both supported her nomination. Tai has worked for the USTR before and speaks Mandarin Chinese. Part of her prior work at the USTR’s office was enforcement on Chinese trade rules. She knows their style.

In her confirmation testimony she said:

“I previously served as America’s chief enforcer against China’s unfair trade practices. I know firsthand how critically important it is that we have a strategic and coherent plan for holding China accountable to its promises and effectively competing with its model of state-directed economics.

“I know the opportunities and limitations in our existing toolbox. And I know how important it is to build what the president has termed ‘a united front of U.S. allies.’

“China is simultaneously a rival, a trade partner and an outsized player whose co-operation we’ll also need to address certain global challenges. We must remember how to walk, chew gum and play chess at the same time. That means here at home, we must prioritize resilience and make the investments in our people and our infrastructure to harness our potential, boost our competitiveness and build a more inclusive prosperity. We must also impart the values and rules that guide global commerce — and we must enforce those terms vigorously.”

The relationship with China is as complicated as, well, the old saying, Chinese arithmetic. There are its efforts to increase its military capability and presence around the globe; its quest to be the number one world economy; its belligerence towards Taiwan; its gradual strangling of freedoms in Hong Kong; its very communist, repressive behaviour towards its own citizens; its position as factory floor to the world; its technology efforts from both internal and purloined sources and its quest to make communism the ruling political and economic philosophy worldwide.

But it has hundreds of millions of people to feed, the population in the aggregate has money to spend and at the word of a government official, political and economic activity can change.

In 2021’s first two months, China’s total exports jumped 60 per cent, imports over 22 per cent, compared, of course, to 2020’s pandemic-affected figures. Exports to the U.S. increased 87 per cent and imports 66 per cent (AP data, customs reports).

Politicians from both parties are concerned about China’s trade and human rights activities and acknowledge its technology theft and spying. So, a big rapprochement with China is unlikely. The best things can happen from the populace buying more beef, the government paying little attention and the USTR watching like a hawk.

About the author

Contributor

Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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