Things are going to get a little more difficult in the short term, with approximately $20 billion of $140 billion likely to be impacted by retaliatory tariffs, Ambassador Gregg Doud, chief agricultural negotiator for the U.S. Trade Representative, told World Pork Expo attendees this week.
“All of the low hanging fruit have been picked,” he said. “These things now that we have to fix are very, very difficult.”
There will be retaliation against U.S. agriculture exports and as already has been revealed by China and Mexico tariffs, pork is a main target.
“Let’s be frank, the lead tip of the spear in all of this right now is pork,” Doud said.
However, he relayed that he had just returned from a trip to China where a “pretty extraordinary meeting” was held. Twenty-five people were on the U.S. end of the table and 25 people were on China’s side of the table, he added.
“There was a pretty robust discussion. We did get a few things done, but we’ve got a long way to go with China.”
China tends to play by different supply and demand rules than many other world partners. “Forces of supply and demand is not something that really reverberates with them very well.”
Still, he said, “I’m confident that over the longer period of time, China’s going to need us in agriculture, regardless of what the short-term situations are.”
Further, he said that during discussions, Chinese officials talk about the country’s resource constraints such as its limited water, land and grain availability.
To help pork producers understand why the Trump Administration is going after China on steel and aluminum, Doud said he had been told a couple years ago that one of China’s major facilities has years of supply laying around and they were doubling its capacity.
“It isn’t about supply and demand for China,” he noted, explaining the U.S. only has one facility left to make the metal and aluminum that goes in our transformers. “Everybody in rural America knows about transformers.”
Doud also discussed what he called “two of the biggest WTO cases” against China happening right now, one of which involves the country's domestic farm subsidies.
“China hasn’t told the WTO what their farm subsidies are since 2010. And in fact, we think by USDA’s analysis, that China has exceeded what it was allowed to do in terms of farm subsidies somewhere in the neighborhood to the tune of $100 billion.”
They want to enter into these dialogues and discussions, but yet they want to operate by a different set of rules, he added.
"The USDA reports that 38% of the world’s residual supply of corn, 52% of the world’s residual supply of wheat, 67% of the world’s residual supply of rice, 22% of the world’s residual supply of soybeans, 40% of the world’s residual supply of cotton is in one country," Doud said, adding that this one country doesn't work off the rules of supply and demand.
"The price of wheat in China is double what it is in the U.S. We’ve got to convince China that it is in their interest to change the way it’s doing business with regard to its farm support programs. Not only is it costing U.S. farmers money how they’re operating, it’s costing every farmer in the world money.”
Doud did say that they believe China has begun to change as it has drawn its corn stocks down. “But we’ve got to have some pretty significant structural change in the way China is operating in agriculture.”
The second WTO case against China is in regard to their tariff rate quota. When China became a member of the WTO in 2001, it agreed to the TRQs on commodities but Doud said they’ve never done it.
“So these challenges in trade are long-festered.”
What do we do about it?
“The best thing that we can do here is while we’ve got all this stuff going on on the defensive side of the ledger, we’ve got to go out and find new markets and play offense in other areas,” Doud said.
Agriculture has to play offense, he explained.
He referenced the North American Free Trade Agreement (NAFTA) and that it is top of mind to the Administration right now.
He also expressed concerned about the situation with Japan. “In terms of meat trade, that’s our number one market.”
He talked about Southeast Asia and Africa and that down the road, he hopes the U.S. will be having a conversation with the U.K. as they exit out of the European Union. “That’s a big market. That’s not something insignificant for us in agriculture.”
“We’re looking at everything we can do,” he said. “If we’re going to be successful, not only do we have to have market access, but we have to keep everybody playing by the rules, as well.”