China has been a mystery for a long time, and trading with them is a more perplexing endeavor. We have all heard about the pending Phase One trade deal with China, which is to be signed very soon. I’ll believe it when I see it.
We always seem to forget that China is a Communist country and they play by a different set of rules. Domestically, the Chinese government says it works for them because they can keep 1.4 billion people under control. It certainly appears that the government is petrified about the citizens of Hong Kong who want to maintain their little slice of democracy. The Chinese government can’t fathom the idea of democracy and freedom because it would cause mayhem. Folks in China do want to be free; imagine that.
That was the idea when the World Trade Organization let China join the organization 20-plus years ago. Free trade and prosperity would force China into a more democratic government. We have seen many autocratic governments throughout history and none of them have worked for everybody in those countries. Nobody can flourish and make their own decisions about what kind of life they want.
We, in the U.S., have been drooling over trade with China for decades, especially in the beef industry. We think we produce the best beef in the world, and we do. Americans are accustomed to grain-fed, well marbled, beef and we’re they only place to get it in volume. Much of the rest of the world has a taste for grass-fed beef and leaner cuts of it.
China has stepped up their imports of grains and pork in the last three months. They seem less discriminating about those commodities than they do beef. I would have to say if China really needs something, they will buy it regardless of price. But, from what I can tell they are very price conscious.
China has become the largest global importer of beef in recent years. Their efforts to approve beef plants for export to China started well before their African swine fever episode started. According to the CME Daily Livestock Report, China’s beef imports are somewhere over 500 million pounds. Japan imports around 1.9 billion pounds and South Korea has 3 billion pounds of beef imports.
However, the price they would pay for U.S. beef is much higher at around $116 per 100 lbs. Compare that to beef from Argentina, which costs $39 per 100 lbs. Argentina sent China 727 million pounds of beef last year. China represents 70 percent of Argentina’s beef exports. I wonder how that will work out with the return of Argentina’s Peronist government, which imposed an export tax on beef when they were in power just four years ago. It was kind of a departure tax on beef.
Currently the U.S. represents about a half of 1 percent of China’s total beef imports. China has quite a few criteria on beef, which the U.S. has pretty much ignored. Their requirements for beef are: Beef and beef products must be derived from cattle that were born, raised, and slaughtered in the U.S. They will allow Mexican cattle and Canadian cattle if they are raised and slaughtered in the U.S. or Mexican and Canadian fed cattle that were delivered for U.S. slaughter. They want traceability to the birth farm with a unique identifier number, which must accompany whole carcass shipments, and beef from cattle under 30 months of age. They are also not interested in beef that was raised with hormones or beta-antagonists, which would be nearly 100 percent of our fed slaughter.
The question is: Jow bad do we want this market? Do we want to adjust our production protocol or initiate the widespread use of a national identification system? These requirements could also be considered non-tariff trade barriers. But then again tariffs on U.S. beef currently stand at 37 percent while other beef exporting countries enjoy a 12 percent tariff. Would the U.S. beef industry be better off with a national identification system? A 5 billion-pound market is enticing. Do we have the infrastructure to serve that market?
Phase One of the China-U.S. trade deal is to be signed by both presidents Jan. 15. No one really knows what’s in store for ag other than China intends to spend much more on U.S. ag products. I guess we must sign it before we can learn the details of the deal. I wouldn’t hold my breath for any revelations for beef exports to China. The politics are awfully strong. —PETE CROW