Has peace been made between the USA and China on agriculture?
What does the agreement between China and the United States for the purchase and sale of agricultural products worth billions of dollars include.
At a ceremony in Iowa, a group of Chinese commodity negotiators on Monday signed agreements to purchase "several billion dollars of agricultural products" with US companies, said Xie Feng, ambassador of the People's Republic of China to the United States . The signed contracts mainly cover soybeans, but the United States Export Council (USSEC) clarified that the agreements also cover corn, sorghum and wheat.
TRUMP'S TRADE WAR ON AGRICULTURAL PRODUCTS
The agreements, signed during this China-US forum, were the first of this magnitude since 2017. Indeed, at that time, Donald Trump had dramatically increased tariffs on agricultural exports to China, which had partly redirected its sources of supply to Brazil. But since the United States is the world's second-largest soybean producer behind Brazil, and China is the largest importer, not all of China's soybean supplies could be redirected to Brazil. Two-thirds of Brazilian exports are already oriented towards China. China accounts for 70% of global soybean imports.
CHINA NEEDS TO BUY, THE USA NEEDS TO EXPORT
This year, Chinese grain purchases from the United States have been lower than normal as Brazil has had bigger harvests than expected. As of Oct. 19, China's purchases of soybeans from the latest U.S. harvest were down 39% from the same period a year earlier, according to U.S. Department of Agriculture data. Corn purchases were down 73% from the previous year.
The United States needs to export to China to limit its trade deficit. Agricultural exports represent a significant portion of US exports: they contribute 5.4% of US GDP. On the other hand, China needs to import a lot of food products to meet the demand of its domestic market. In fact, China has 20% of the world's population, but has only 10% of the world's agricultural land. It compensates for this deficit in agricultural production by massively importing agricultural and agri-food products. As of 2022, China had imported $236 billion in agricultural products, of which 15.4% came from the United States.
NON-BINDING LETTERS OF INTENT
However, these agreements were signed in the form of framework contracts, in other words, they are non-binding letters of intent, which allow you to purchase later, without formal conditions of sale. So it is not certain that the Chinese will import more food in 2024 from the United States, as the 2023 harvests were exceptionally good. But this will not necessarily be the case for subsequent years.
INTERDEPENDENCE IS STRONG
Now, beyond the technological hyper-competitiveness that is played out between China and the United States, mainly strengthened by the development of their respective legislative arsenals and the desire to unite their partners behind them, the interdependence between the two countries tends to grow , in particular on the agricultural question.
In fact, while the Trump administration imposed economic sanctions on China, trade continued to grow (+45% in the last ten years for US exports to China, for example). Sectors deemed strategic and subject to restrictions are not surprisingly excluded, as evidenced by the 2.1 billion euro increase in US semiconductor exports to China in 2021. Furthermore, Sino-American cooperation also takes shape in scientific research, as these two nations are the most collaborative nations in the world in terms of co-written articles and joint patents.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/stati-uniti-cina-commercio-prodotti-agricoli/ on Mon, 30 Oct 2023 14:07:23 +0000.