U.S. urged to rethink relationship with China

Trade between the two countries called mutually beneficial but increased hostility may force U.S. to seek other partners

Regardless of a new president soon to take power in Washington, D.C., U.S. agricultural trade with China is likely to continue being both substantial and political, economists from Iowa and Ohio said during an outlook conference.

China needs to import food and the U.S. consistently produces export supplies.

“From China’s perspective, this is a mutually beneficial relationship,” Wendong Zhang, an Iowa State University economist, said during Ohio State University’s Agricultural Policy and Outlook Conference.

China has been importing large amounts of U.S. agricultural goods in 2020 as part of its Phase One agreement with U.S. president Donald Trump’s administration to de-escalate the ongoing trade war launched by the U.S. in 2018.

The first-year target is for $33.4 billion of U.S. agriculture goods to flow to China, but until the end of September China had fallen behind the necessary pace by about one third, importing only $12.7 billion. It is expected to be difficult for the country to reach its commitment by February, the anniversary of the deal.

However, Zhang said the gross export numbers are good and the surge in exports of pork, corn and beef is a great development for the United States, which has generally just exported a lot of soybeans to China.

“I think we have huge opportunities to take advantage (of), to potentially have a more balanced portfolio,” said Zhang.

Right now there seems to be sincere Chinese desire to comply with the deal and for the U.S. to let it work, something that helps both nations.

“There are signals both countries are trying to make this work,” said Zhang.

However, due to the fraught geopolitical situation between the countries, the U.S. should think about lessening its dependence on China, said Ian Sheldon of Ohio State University. Even though China has been buying large quantities of U.S. products, it is striving to find other sources and the U.S.’s proportion of China’s imports has been falling.

“Maybe the U.S. … needs to think about markets other than China,” said Sheldon.

The incoming Joe Biden presidential administration is likely to try to help cobble together a coalition of trading nations to resist China’s abilities to manipulate global trade, Sheldon said. It will also stick with the Trump administration’s focus on pushing back against Chinese intellectual property theft, forced technology transfers and other negative behaviours.

When it comes to China, the Biden White House is unlikely to try to make friends.

“It’s just a matter of tone, I think,” said Sheldon about the differences between Trump’s and Biden’s teams.

Zhang said the increasing hostility between China and the U.S. is worrisome for agriculture trade.

“We are seeing a quick deterioration” in the overall relationship, said Zhang.

However, the mutually beneficial agriculture trade deal could help lead to some stability and a way forward.

“The political significance and the meaningfulness of maintaining this economic dialogue through this Phase One deal becomes even more important,” said Zhang.

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