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By James Rice and Matthew Waller | 08/14/2008
Washington does a lot of complaining about trade “imbalances” with China. So, at best, it’s puzzling that Congress is currently considering a measure that would jeopardize a booming American export sector to China. That’s exactly what’s under way now in the agricultural field, and, at worst, it could result in a trade war.
Agricultural exports from the U.S. to China reached $8.3 billion in 2007 and, in the first three months of 2008, exports were 92 percent higher than the same period in the prior year. The U.S. is China’s largest supplier of agriculture products. American trade officials have invested decades into this trade relationship with China, taking down barriers while preaching a fair and scientific approach to trade. Yet budget action in the U.S. Congress is putting this trade at risk.
At issue is an amendment inserted by the House Appropriations Subcommittee on Agriculture into the 2008 USDA appropriation bill. The bill was signed into law last year and the 2009 bill is currently working its way through Congress. The amendment would cut off funding for any USDA actions related to discussions with China over China’s poultry exports. For example, USDA staff wouldn’t be able to work on the issue, nor discuss it with their Chinese counterparts, on “government time.”
It might sound innocuous, but, in practice, this would represent a major problem. This legislation would make it impossible for China to even discuss exporting fully cooked poultry into the U.S. Although this represents a fairly small commercial opportunity for China, Beijing views it as a matter of prestige for the country to have a few plants that are authorized to sell in the American market. If Congress stalls progress on this issue by using the appropriations bill to quash discussions, an agricultural trade war could be on the menu for October.
Already the Chinese government has delayed further discussions on all outstanding agricultural trade issues pending the rescinding of this amendment. If Congress passes the amendment for a second year in a row, Beijing could ban imports of U.S. poultry and suspend negotiations on other trade conditions, choosing to take its business to Brazil or to Southeast Asia instead. Future dialogue about new agricultural trade worth more than $10 billion to American farmers is on the line.
The effects for Americans of any Chinese retaliation on this issue could be significant given the importance of U.S. agricultural exports to the American economy. Consider chicken feet. Americans do not like to eat, or even set eyes on, chicken feet, but the Chinese love them. America, therefore, sells all of its chicken feet to China, a trade worth more than $380 million annually. This trade helps support the employment of 30,000 American farmers, including 6,500 at Tyson.
The members of the House Appropriations Subcommittee who have approved this amendment believe that they are protecting American consumers from tainted Chinese exports. But an end to engagement with China isn’t the solution, nor is the pending trade war. The best solution is to fully fund and empower the FDA and USDA to protect American consumers from unsafe — as opposed to simply all — food products. This will, and should, include cooperating with Chinese regulators to help them improve their own standards.
Today, the USDA does not allow Chinese poultry to enter the U.S. market. It will only do so if Chinese processing plants operate under the same standards as those imposed on American producers by the USDA. The USDA and the FDA, among others, have made great progress in recent years working with their Chinese counterparts to improve food-processing safety standards. The subcommittee amendment also threatens these efforts.
For years, the U.S. has told China that agricultural trade should be based on science, not politics. Yet Congress is now undermining that approach by making trade completely political and nonscientific. America needs to dialogue with her long-term trading partner, China — a collaborative dialogue that is based on technical facts and uses a scientific approach. Fair trade benefits both countries unequivocally, as is the case with chicken feet. It’s now up to the U.S. Senate to amend the Agriculture Appropriations Bill so that the USDA’s experts can remain engaged with their Chinese counterparts. If dialogue stops, the end result can only be a trade war.
James Rice is a vice president and China country manager for Tyson Foods Inc. and a member of Food Processing’s Editorial Advisory Board. Matthew Waller is a professor of supply chain management at University of Arkansas’ Sam M. Walton College of Business.
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