Experts: Biden likely to take slow approach on China trade
Kirk Leeds, Iowa Soybean Association CEO, visits a soybean processor near Dhaka, Bangladesh during a recent trade mission. (Photo courtesy of Iowa Soybean Association)
Agricultural experts don’t expect President-elect Joe Biden to quickly reverse the United States’ chilly relationship with China.
They are split on whether Biden will quickly loosen some tariffs on China to ease negotiations that could build on recent increases in the price of corn and soybeans — two of Iowa’s top agricultural commodities.
“In the short term, we will not likely see a significant difference in the Biden administration as it relates to China,” said Kirk Leeds, CEO of the Iowa Soybean Association. “I hope, and even anticipate, that there will be a change in tone of the rhetoric.”
In an interview, Leeds said the challenge is that many farmers agreed with President Donald Trump that China had gotten the better end of previous trade deals and was stealing intellectual property. Many agreed something needed to be done.
“The disappointment is not that the Trump administration went after China, because there are issues with the Chinese,” Leeds said. The problem has been little action and a tit-for-tat tariff war that hurt Americans, especially farmers, he added.
“I think the Biden administration will over a period of time do a better job of rallying some of our allies and other countries in the world that also are concerned about China,” Leeds said.
Iowa State University economist Wendong Zhang told Brownfield Ag News it is unlikely Biden will quickly change tariffs applied to Chinese goods.
“I want to lower your expectations on potential tariff rollbacks,” Zhang said. “That will likely be less important than rollout of the COVID-19 vaccines, thinking about how to jump start the global economy, and even the Paris Accord for climate change probably become more important issues than thinking about trade policies.”
A big issue for Biden, as it was for Trump, is China’s subsidies for state-controlled ag operations that compete with farm interests in other nations. “It’s not fair for businesses to have to compete with China’s subsidized operations,” Leeds said.
Former U.S. Ambassador to China Terry Branstad, a former long-time Iowa governor, addressed that concern at a recent Iowa conference.
Most ag groups aren’t waiting for the federal government to solve all their problems. They are working on expanding markets on their own, too. Leeds said his organization hopes to meet with officials in China and other parts of Asia this year if the pandemic eases.
Leeds’ association and others are working to expand demand in India and other parts of Asia, and also in Egypt. Top buyers of U.S. soybeans include China, Mexico, the Netherlands, Egypt and Indonesia.
‘Only game in town’
Leeds noted that corn and soybean prices have risen steadily over the past three months. While additional purchases by China under last year’s Phase One agreement helped, it wasn’t the main reason for the surge.
“From a political standpoint, the (Phase One) agreement did allow trade and kind of turned down the rhetoric a little bit and allowed the Chinese to get back into the marketplace,” Leeds said.
But there were bigger market forces that led to the rebound in soy prices, including drought that disrupted the growing season in Brazil, another large producer of soybeans, Leeds said.
“Most of it has to do with us being the only game in town,” Leeds said. Between local issues with soybean crops in other nations and China’s heavy purchases of South American soybeans during the trade war, many other sources of soybeans don’t have much of the crop left, Leeds said.
That, and China’s move to install high-tech hog farms, have increased demand for U.S. soybeans and spiked prices that had been low for years, Leeds added. Around the globe, demand for meat has increased, and soybeans are a common food source for livestock.
Responding to a question from Iowa Capital Dispatch at a December meeting with reporters, U.S. Sen. Chuck Grassley said he expects some tariffs, including those on steel and aluminum, to fall as the Biden administration looks to thaw relations with China. He also expects a free trade agreement with the United Kingdom, and a return to international agreements such as the Trans-Pacific Partnership.
While President Trump preferred pacts with individual countries, Biden is likely to pursue multination agreements, Grassley said.
Grassley said now that the U.S. has a new agreement on agricultural products with Japan, it is likely that pacts involving manufactured goods and services will follow.
Biden has said the U.S. needs to work with other countries to set global trading rules to counteract some of the problems with China that President Trump was trying to address, Reuters reported. The Wall Street Journal reported Biden envisions a “grand alliance,” a sharp turn from Trump’s “America First” global strategies, which some saw as isolationist.
While the U.S. sat on the sidelines per Trump’s decision to leave the Trans-Pacific Partnership talks, China and 14 other Asian countries signed the Regional Comprehensive Economic Partnership pact. That agreement covers 30% of the world’s economy, including China, Japan and South Korea.
The United States accounts for 25% of the world’s economy.
Biden has said he would detail his trade plans the day after his Jan. 20 inauguration.
Agriculture interests have hailed Biden’s nomination of former Iowa Gov. Tom Vilsack as agriculture secretary, a post he held for eight years in the Obama-Biden administration.
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