Let's Make A Trade Deal

BY MATTHEW WILDE

New trade deals in the works between the U.S. and several countries could spur an agreement with China, according to a top U.S. Department of Agriculture (USDA) official.

But farmers shouldn’t expect China to resume buying U.S. soybeans anytime soon, says Ted McKinney, USDA undersecretary for trade and foreign agricultural affairs.

McKinney participated in a trade roundtable discussion with Iowa ag leaders in late November, hosted by Iowa Secretary of Agriculture Mike Naig. A press conference followed. The Trump administration is acutely aware of the financial pain the ongoing U.S.-China trade war and unfair Chinese trade practices are causing producers, McKinney told the media, especially when it comes to soybeans.

“Farmers have suffered as a result of some of the Chinese behaviors,” McKinney says. “I think we’re in this with China a little while longer. We’re not going to stop and restore trade without getting some of these things fixed.”

The U.S. agreed to new trade pacts with Mexico, Canada and South Korea this year. The Trump administration recently announced intentions to begin negotiating free trade agreements with Japan, the European Union, the Philippines and the United Kingdom.

McKinney hopes trade progress with other nations will inspire the Chinese to address issues with the U.S. to end the trade war between the two countries.

Ted McKinney, U.S. Department of Agriculture undersecretary for trade and foreign affairs, talks about the latest trade developments during a press conference this fall at the Wallace Building in Des Moines. It followed a roundtable discussion with Iowa ag leaders.

“It might bring some pressure,” McKinney says. “They (Chinese leaders) understand geopolitical dynamics better than anyone. They know exactly what we want.”

A resolution, though, is far from imminent.

“It won’t be days or weeks,” McKinney adds. “I hope it’s not years.” It’s not the news soybean farmers want to hear about their largest export customer after a record harvest, both state and nationwide.

The USDA projects U.S. production at 4.6 billion bushels. Iowa is pegged at 576.5 million bushels.

Grant Kimberley, Iowa Soybean Association market development director, stressed to McKinney that farmers are appreciative of USDA’s efforts to increase soy exports worldwide and help mitigate financial losses from trade disputes. But unprofitable prices and large stockpiles of soybeans are taking a toll on farmers.

The USDA predicts ending stocks for 2018-19 at 955 million bushels, an all-time high.

“Ultimately for soybeans, it comes down to China,” Kimberley says. “We need an agreement to significantly boost exports and prices.”

China placed a 25 percent tariff on U.S. soybeans on July 6 in response to U.S. duties on its products. The move drastically reduced sales to the country.

Soybean prices plummeted about $2 per bushel since the beginning of March when the U.S. put duties on steel and aluminum from most countries, including $3 billion worth of Chinese imports. Since then, the U.S. has put additional tariffs on $250 billion worth of Chinese imports. China retaliated with duties on $110 billion worth of mostly U.S. agricultural products.

Kimberley says the trade war needs to end soon or early next year to limit producer losses. It will likely take the leaders of both countries to find an amicable solution, he contends.

President Donald Trump and Chinese President Xi Jinping met during the G-20 summit in Buenos Aires, Argentina, in late November to discuss the trade dispute.

“There are lot of big issues to work out,” Kimberley says. “Undersecretary McKinney knows the issues. He knows what’s at stake and the importance of getting trade deals done in a timely manner.”

Ambassador Gregg Doud, chief ag trade negotiator for the Office of the United States Trade Representative (USTR), detailed why the U.S. placed tariffs on Chinese goods during visits to Iowa this summer and at the Agri- Pulse Ag Outlook Forum Sept. 27 in Kansas City.

Gregg Doud, Chief Agricultural Negotiator in the Office of the United States Trade Representative

Doud provided several examples of China's unfair trade practices:

• China is pouring state resources into expanding the world’s largest aluminum plant even though there’s a glut of the metal worldwide.

• China delays approvals of U.S. ag biotech events, even though Chinese citizens have been caught stealing biotech seeds from U.S. companies.

• A USTR investigation shows China has stolen U.S. intellectual property valued at $50 billion.

• China has violated World Trade Organization rules by over subsidizing its farmers by more than $100 billion.

• China forces U.S. companies to share technology with Chinese counterparts for access to country’s consumers.

“The U.S. has been having a dialogue with China for years about this. It wasn’t working,” Doud says. “We have a president who says it’s time to deal with it.

“When it comes to ag subsidies, there’s no way China is playing by the rules,” he continues. “We have to help them understand they are not only costing U.S. farmers money but every farmer money.”

Iowa producers are encouraged about the new U.S., Mexico, Canada Agreement and other trade deals in the works to boost exports and commodity and livestock prices, according to Ag Secretary Naig. But a resolution with China is needed soon.

China purchased more than 1 billion bushels of U.S. soybeans last year and 1.4 billion in 2016-17 worth tens of billions of dollars. But it can be better, whether its soy, beef, poultry or dried distillers grain.

“Folks understand China has been negatively impacting our markets for years,” Naig says. “We have a tremendous opportunity to export there at a higher level.”

Contact Matthew Wilde at mwilde@iasoybeans.com.