Wednesday, December 20, 2017

Expanding Exports of US Farm Products Wrong Way to Cut Trade Deficit With China
By Hu Weijia
Global Times
2017/12/20 23:53:39

The US merchandise trade deficit with China has reportedly risen to its second-highest level on record. This scenario might trigger renewed complaints and protectionism in the US and increase the pressure on bilateral ties.

Major steps are needed to reduce the trade deficit, but US efforts to push up exports of agricultural products to China should not take priority. Bilateral economic ties will only worsen in that case, as the US promotes exports of certain farm products that benefit from its agricultural subsidies.

As the US threatened new barriers to steel imports after accusing China of dumping the product in the US market, the US itself is gearing up to "dump" cotton abroad. As of November 23 in the 2017-2018 US fiscal year, net export sales for US cotton had reportedly increased nearly 40 percent year-on-year. Cotton is a profitable crop for US farmers, who can obtain hidden subsidies from the US government.

A considerable portion of the subsidized cotton has been exported to China, hurting the interests of Chinese cotton farmers.

Cotton subsidies are just the tip of the iceberg, because a number of other agricultural subsidies go to US farmers.

China is one of the biggest victims of this protectionism. According to the Office of the United States Trade Representative, China remained the second-largest export market of the US in 2016, with the leading export categories including soybeans, coarse grains, hides and skins, pork and pork products, and cotton. In recent months, US agricultural exports to China have risen rapidly. This surge may propel China to the top destination for US agricultural exports at the end of this year.

There are fears that US President Donald Trump won't be able to avoid a trade war with China, as the transition in the world's second-largest economy undermines US competitiveness and thus leads to bigger trade deficits. However, agricultural exports cannot serve as a life-saver for Trump. The export growth of some US farm products isn't sustainable if the increase is based on agricultural subsidies.

We can expect a possible protest by China against US agricultural subsidies if a surge of farm product exports harms the development of the Chinese agricultural sector. Additionally, with the implement of the Belt and Road initiative, agriculture cooperation between China and countries in Southeast Asia and South Asia is likely to increase, further undermining US competitiveness in agro-industry.

The US' comparative advantage has shifted away from farming and into high-technology industries. China and the US should consider how to tap the potential of cooperation in high-technology fields to boost US exports of such products, including computer chips and commercial aircraft.

If the US is unwilling to do hard work such as tapping into its comparative advantages to boost exports, Washington will have no reason to blame China for a "sluggish" pace in reducing the deficit.

Trump's "America First" policy sends a message that competition comes before cooperation in the eyes of the US. If this is true, it is not necessary for China to bother too much about the issue of the US trade deficit.

The author is a reporter with the Global Times.

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