China Stealing U.S. Chicken Industry

Last August, the U.S. won a WTO dispute about high Chinese chicken tariffs.  With U.S. corn prices low and Chinese consumers leery of eating Chinese-produced chicken due to outbreaks of Avian Flu in China, everything seemed set for a huge rise in U.S. poultry exports to China.  But that is not the case.

When the Chinese government is forced to take down tariffs, it simply puts up non-tariff barriers.  A 2010 Report to Congress on China's WTO Compliance published by the United States Trade Office explained why Chinese purchases of U.S. meat had been failing to grow despite growing consumption of meat by Chinese consumers:

In 2010, the principal targets of worrisome practices by China’s regulatory authorities were poultry, pork and beef products, where anticipated growth in U.S. exports of these products was again not realized. In particular, China continued to block the importation of U.S. beef and beef products, well over three years after these products had been declared safe to trade under international scientific guidelines.

U.S. chicken producers don’t expect much change as the result of the WTO victory.  According to the March 28 outlook from Rabobank Poultry Quarterly, there is the “potential for increased U.S. poultry exports to China, not the expectation of such an increase.  As a result, U.S. chicken processors are building new chicken farms and chicken processing plants in China, even though they have to take extraordinary precautions to prevent an Avian Flu outbreak.  A Mother Jones story quotes Cargill CEO David MacLennan saying:

So we are building a facility in Shuzou, Nanjing, which will have 45 farms and it's a chicken facility that will process 1.2 million chicken every week. That's 60 million chicken a year. We have a hatchery, where we hatch the eggs and one-day old chicks, DOCs, get transported to the farms. The employees live on the farm. They can't leave because then you increase the risk of disease. So you grow the chicken for 44 days. The chicken goes to the plants, get processed, might be for KFC and McDonald's, might be for retail. They can count on us because they know where every one of their chicken came from. It came from us because we're fully integrated as opposed to other companies.

Meanwhile, the Obama administration is assisting the Chinese government in the United States by putting small chicken farmers out of business through draconian EPA regulation of chicken manure and other byproducts of raising chickens.

And don’t expect the U.S. chicken producers in China to feed their chickens with American corn.  The Chinese government is taking care of that little detail also. According to an April 14 Reuters article, they are keeping out U.S. corn through their non-tariff barriers.  Here is a selection:

CHICAGO (Reuters) - China's rejections of a banned variety of genetically modified U.S. corn have cost the U.S. agriculture industry up to $2.9 billion, a grain group said on Wednesday in the first estimate on losses from the trade disruptions.

The National Grain and Feed Association (NGFA) estimated in a report that rejections of shipments containing Syngenta AG's Agrisure Viptera corn resulted in losses of at least $1 billion, based on an economic analysis that included data supplied by top global grain exporters.

China, the world's third-biggest corn buyer, in November began rejecting corn containing Viptera, known as MIR 162, after previously accepting the grain. The variety, which has been cleared by the United States and other importers, has been awaiting approval by Beijing for four years...

The Chinese government minimizes imports and maximizes exports with the United States in order to steal U.S. industries.  They minimize imports through currency manipulation, tariffs, and non-tariff barriers in order to steal American exporting industries.  They maximize exports through currency manipulation and export subsidies in order to steal American industries that compete with imports.

If trade were balanced, neither country would steal the other’s industries.  Instead, each country would trade what it could produce with comparative advantage for what the other could produce with comparative advantage.

But in 2013, the Chinese government let in only $0.34 of American products for every $1.00 of Chinese products that they exported to the United States.  They have already forced American vehicle and heavy equipment exporters to build their factories in China in order to access the Chinese market.

For example, in 2012, the Chinese government raised its already high tariffs on big-engine cars, forcing GM to build new Cadillac factories in China if it wanted to continue to access the growing Chinese market for luxury cars.  Now the Chinese government is forcing U.S. chicken exporters to move their farms and processors to China.

The Chinese government probably targets U.S. industries because the U.S. is its chief geo-political rival.  Doing so helps it replace the United States as the world’s premier economic power.  It is assisted in this task by some leftist elements of the Democratic Party and by the U.S. Chamber of Commerce, which strongly influences the Republican establishment’s policies, partly using funds raised from foreigners.

The U.S. government could force the Chinese government to let in American products by imposing a tariff on Chinese products that is scaled to the U.S. trade deficit with China. The scaled tariff would be WTO-legal if imposed by a trade-deficit country (such as the U.S.) in non-discriminatory fashion upon all of the countries that run both overall trade surpluses and trade surpluses with the United States.

The scaled tariff is safe from trade retaliation.  Any Chinese counter-tariffs would raise U.S. tariffs upon Chinese products.  Also, any withdrawal of Chinese loans to the U.S. could be countered by taking down the U.S. tax barriers that keep U.S. corporations from repatriating their profits.

Agriculture has long been one of the bright points in the rather bleak U.S. export picture.  But even with the natural comparative advantage provided by abundant fertile farmland and the technological innovation that has made U.S. agribusiness prosperous, U.S. agricultural exports are not immune to expropriation.  One hopes that soon U.S. leaders will stop being too chicken to do anything about it.

The authors co-authored the forthcoming book Balanced Trade:  Ending the Unbearable Costs of America's Trade Deficits, published by Lexington Books.

Last August, the U.S. won a WTO dispute about high Chinese chicken tariffs.  With U.S. corn prices low and Chinese consumers leery of eating Chinese-produced chicken due to outbreaks of Avian Flu in China, everything seemed set for a huge rise in U.S. poultry exports to China.  But that is not the case.

When the Chinese government is forced to take down tariffs, it simply puts up non-tariff barriers.  A 2010 Report to Congress on China's WTO Compliance published by the United States Trade Office explained why Chinese purchases of U.S. meat had been failing to grow despite growing consumption of meat by Chinese consumers:

In 2010, the principal targets of worrisome practices by China’s regulatory authorities were poultry, pork and beef products, where anticipated growth in U.S. exports of these products was again not realized. In particular, China continued to block the importation of U.S. beef and beef products, well over three years after these products had been declared safe to trade under international scientific guidelines.

U.S. chicken producers don’t expect much change as the result of the WTO victory.  According to the March 28 outlook from Rabobank Poultry Quarterly, there is the “potential for increased U.S. poultry exports to China, not the expectation of such an increase.  As a result, U.S. chicken processors are building new chicken farms and chicken processing plants in China, even though they have to take extraordinary precautions to prevent an Avian Flu outbreak.  A Mother Jones story quotes Cargill CEO David MacLennan saying:

So we are building a facility in Shuzou, Nanjing, which will have 45 farms and it's a chicken facility that will process 1.2 million chicken every week. That's 60 million chicken a year. We have a hatchery, where we hatch the eggs and one-day old chicks, DOCs, get transported to the farms. The employees live on the farm. They can't leave because then you increase the risk of disease. So you grow the chicken for 44 days. The chicken goes to the plants, get processed, might be for KFC and McDonald's, might be for retail. They can count on us because they know where every one of their chicken came from. It came from us because we're fully integrated as opposed to other companies.

Meanwhile, the Obama administration is assisting the Chinese government in the United States by putting small chicken farmers out of business through draconian EPA regulation of chicken manure and other byproducts of raising chickens.

And don’t expect the U.S. chicken producers in China to feed their chickens with American corn.  The Chinese government is taking care of that little detail also. According to an April 14 Reuters article, they are keeping out U.S. corn through their non-tariff barriers.  Here is a selection:

CHICAGO (Reuters) - China's rejections of a banned variety of genetically modified U.S. corn have cost the U.S. agriculture industry up to $2.9 billion, a grain group said on Wednesday in the first estimate on losses from the trade disruptions.

The National Grain and Feed Association (NGFA) estimated in a report that rejections of shipments containing Syngenta AG's Agrisure Viptera corn resulted in losses of at least $1 billion, based on an economic analysis that included data supplied by top global grain exporters.

China, the world's third-biggest corn buyer, in November began rejecting corn containing Viptera, known as MIR 162, after previously accepting the grain. The variety, which has been cleared by the United States and other importers, has been awaiting approval by Beijing for four years...

The Chinese government minimizes imports and maximizes exports with the United States in order to steal U.S. industries.  They minimize imports through currency manipulation, tariffs, and non-tariff barriers in order to steal American exporting industries.  They maximize exports through currency manipulation and export subsidies in order to steal American industries that compete with imports.

If trade were balanced, neither country would steal the other’s industries.  Instead, each country would trade what it could produce with comparative advantage for what the other could produce with comparative advantage.

But in 2013, the Chinese government let in only $0.34 of American products for every $1.00 of Chinese products that they exported to the United States.  They have already forced American vehicle and heavy equipment exporters to build their factories in China in order to access the Chinese market.

For example, in 2012, the Chinese government raised its already high tariffs on big-engine cars, forcing GM to build new Cadillac factories in China if it wanted to continue to access the growing Chinese market for luxury cars.  Now the Chinese government is forcing U.S. chicken exporters to move their farms and processors to China.

The Chinese government probably targets U.S. industries because the U.S. is its chief geo-political rival.  Doing so helps it replace the United States as the world’s premier economic power.  It is assisted in this task by some leftist elements of the Democratic Party and by the U.S. Chamber of Commerce, which strongly influences the Republican establishment’s policies, partly using funds raised from foreigners.

The U.S. government could force the Chinese government to let in American products by imposing a tariff on Chinese products that is scaled to the U.S. trade deficit with China. The scaled tariff would be WTO-legal if imposed by a trade-deficit country (such as the U.S.) in non-discriminatory fashion upon all of the countries that run both overall trade surpluses and trade surpluses with the United States.

The scaled tariff is safe from trade retaliation.  Any Chinese counter-tariffs would raise U.S. tariffs upon Chinese products.  Also, any withdrawal of Chinese loans to the U.S. could be countered by taking down the U.S. tax barriers that keep U.S. corporations from repatriating their profits.

Agriculture has long been one of the bright points in the rather bleak U.S. export picture.  But even with the natural comparative advantage provided by abundant fertile farmland and the technological innovation that has made U.S. agribusiness prosperous, U.S. agricultural exports are not immune to expropriation.  One hopes that soon U.S. leaders will stop being too chicken to do anything about it.

The authors co-authored the forthcoming book Balanced Trade:  Ending the Unbearable Costs of America's Trade Deficits, published by Lexington Books.

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