American agriculture prospects unclear as China’s Belt and Road persists
Editorial Note: This story was written on April 1, 2021 for my Business News Writing course at Tsinghua University
After nearly two years of the U.S.-China trade war, China purchased a record 55 million tons of agricultural exports in 2020 — more than before the trade war.
Starting with the trade war in 2018, the U.S. government provided $14.5 billion to farmers hurt by Chinese tariffs on grains, especially soybeans. American Soybean Association economist Scott Gerlt said in an email there was a 156% increase in soybean sales to China from 2019 to 2020 — a potential signifier of resumed economic cooperation.
While not directly affecting the U.S., China has been investing trillions of dollars into global infrastructure and promoting economic cooperation between over 70 countries through its Belt and Road Initiative. Agriculture is a component in the BRI as China hopes to diversify its food reliance.
China sought more soybeans and livestock feed from American competitors — including Brazil and Argentina — in the trade war. While American farmers benefit from long-established operations, prospects are uncertain, StoneX Group’s senior Asia commodity analyst Darin Friedrichs said in an email.
“China has realized it’s too reliant on the U.S. for agriculture import, but it’s a slow process,” he said. “When Beijing wanted to increase soybean production, they were able to give a lot of subsidies domestically and soybean production increased a few million tons over a few years.”
This pales in comparison to the hundreds of million tons China imports from the U.S. and Brazil.
Long-term efforts are predicted to be harmful for the U.S., according to the Shanghai-based analyst.
Friedrichs said that so far the BRI has had a “noticeable but not meaningful” effect on American agriculture as Beijing seeks to diversify.
“It’s’s like turning an oil tanker,” he said. “It took Brazil decades to become the exporting powerhouse it is today. There are efforts — like China-approved soybeans from Ethiopia — but that’s going to have a limited impact in the near term.”
Friedrich predicts over time China’s diversion plans will diminish the potential for American farmers to increase production.
Despite former U.S. President Trump’s phase one trade deal agreement with China signed in January 2020, the Alaska talks this March demonstrated a continuation of tense relations, distrust and struggling cooperation between the world’s two largest economies.
Friedrichs said bilateral relations have not improved under the Biden administration and that “the relationship is tense but trade has normalized.”
The BRI primarily focuses on Eurasia and African trade networks and development but claims to be open to all countries. China continues to invest in non-BRI countries in Latin America and around the world.
Chinese investment in South America amounted to nearly $114.32 billion from 2013–2019 — more than $600 billion less than its overall investment in BRI countries — according to the American Enterprise Institute’s China Global Investment Tracker.
Another contributing factor started in 2018 with an outbreak of African Swine Fever in Chinese pork markets, benefiting American pork ranchers and farmers who raise livestock feed.
Texas A&M University agricultural economics professor David Anderson focuses on livestock economics. Anderson said in an email he doesn’t predict near-term changes in meat and dairy trade with China.
He said grain might be affected as “easy land travel” across Eurasia may divert trade from shipping. America’s competitors also rely on shipping and would be affected if China starts to rely on grain sourced in Russia, Ukraine and the Black Sea area.
BRI investment in the Chinese border town Manzhouli now serves as the port of entry for 60% of Eastern European exports into China, according to USDA senior economist Fred Gale in a presentation.
American media and research predominately focus on the BRI’s geopolitical implications for the U.S. Economic implications are generally unclear with the agricultural sector being no exception.
University of Texas at San Antonio political science chair Jon Taylor said mixed BRI results contribute toward the uncertain economic impact –if any — in an email.
The BRI was supposed to create a “massive economic engine” to drive development in western China, Africa and Asia. He said these goals have not been met as anticipated despite infrastructure development.
“Ultimately, it would be in the best interests of the U.S. to consider why and how the BRI came into being and work to create a parallel development initiative — an idea that’s now being floated by the Biden Administration,” Taylor said.
