Looks like we’re finally getting the trade machine warmed up. President Donald Trump was in Argentina at the G20 talks over the weekend of Nov. 30-Dec. 2 and met with China’s President Xi Jinping. They agreed to work together to sort out their differences on trade, tariffs, intellectual property rights, non-tariff trade barriers, cyber theft and intrusions. Trump essentially wants China to trade in the real world like everyone else in the World Trade Organization.
Over the next 90 days they will attempt to work it all out, but everyone remains skeptical and will proceed in a cautious manner. Seems like trust is the big stumbling block and China has never given anyone reason to trust them.
The United States-Mexico-Canada Agreement trade deal has been signed by all parties, but tariffs remain on steel and aluminum. Mexico and Canada have both said that the tariffs need to come off now before they drop any of their retaliatory tariffs. Seems like a reasonable request to get trade back to a predictable level, especially for agriculture.
China has been having real issues with the African swine fever and it has shown up in 20 provinces. The disease will kill hogs, but the meat is safe for human consumption. Chinese hog farmers are trying to ship as many hogs as possible to packers to mitigate their loses. Right know pork is cheap in China, but that may not last for long. Nobody has a handle on the African swine fever; there are no vaccines available to control it.
Ironically, Chinese pork companies started buying U.S. pork during the week of Nov. 22. A total 3,348 tons of pork was purchased, and we understand that 9,384 tons have been purchased to be delivered next year. Chinese tariffs on pork are 68 percent. All the hog market analysts are going wild speculating that the African swine fever is worse than we think—or that China is willing to share. I can’t believe that China’s hog farmers are just going to try to live with the disease. It is spreading quickly, even with China’s ban on transporting hogs.
China is the largest pork-consuming nation in the world. One analyst said, “Basically every hog that is culled or killed to try to control this disease is a hog that has to be imported.” So, it looks like China is open for pork exports. Logic would suggest that tariffs should be reduced to normal levels soon. Let’s just hope they start buying soybeans soon.
But it’s no wonder that the world’s two largest economies are cautious of one another. The U.S. has led the world in global policy since World War II. China has been in the global game for less than 30 years and is now the nation trying to colonialize the world’s smaller countries. We still have fundamental differences in how we do business and I would say that we need to do business together.
China is still a Communist country. It is ruled by an autocrat, President Xi. The Communist party doesn’t quite understand the term “private property rights,” which is why companies doing business there are forced to turn their intellectual property over to China’s government-owned businesses. They conduct industrial espionage because they can. As a culture they have no respect for private property.
While the U.S., a democracy, allows business to freely operate under some regulation. Most everyone we do business with understands and respects the trading rules established by the World Trade Organization. And yes, perhaps it’s time to upgrade the institution and make it work for more countries.
This is why Trump’s trading issues are so important to get right. But it still seems that neither China or the U.S. is taking each other too seriously. How can they? We literally come from two different cultural worlds and are not willing to compromise.
This is one thing U.S. citizens don’t understand: There are a lot of autocratic nations out there, like Saudi Arabia, which is a monarchy; the family rules. There was a side story going around the G20 that Russia’s President Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed bin Salman clung to each other like strangers at a lonely dance.
Trade with Canada and Mexico should resume soon. U.S. should give in on the metal tariffs. We don’t really have big trade issues in North America. China, on the other hand, needs to make some adjustments. It’s hard to understand how they can enjoy the benefits of capitalism while remaining Communist. — PETE CROW
