China Stands Up at Trade Talks

Tuesday, July 29, 2008 5:56
Posted in category Uncategorized

There are reports coming out that China has thrown a huge wrench into recent discussions which would theoretically open the global trade markets on a different level. According to the WSJ report China Objection Threatens Trade Deal (subscription required), the three key commodities that were mentioned are rice, cotton, and sugar.  IHT Coverage is here

In reading the reports, the feeling I have is that both the developed and developing nations were not only shocked, some were vocal about their position that China has deconstructed a lot of progress in one fell swoop.

However, before casting judgment, I thought it best to work through the issues a bit more and perhaps try to deconstruct some reasons as to why China may be balking.  to be clear, I am not in the room, I have have not spoken to anyone who is, so the following is just a list that I have put together

There are certain things I know for certain:

1)China is concerned about overseas agricultural imports that would crush local producers, and thus jeopardizing their good security.

All valid concerns in my opinion, but are tariffs really the solution to address this concern?

I took a quick look at UN Stats to see what the numbers looked like, and it already looks like China is importing a huge amount of both sugar and cotton (I could not find a clear picture of rice situation)

2)  The current RMB/ USD level makes US crops quite cheap, which only places further pressure on the local market (i.e. farmers) to reduce prices to meet the market

Again, a valid concern.  Especially if you are a local leader worried about the conditions of farmers and do not want them taking a stroll to your office.

3)  China may be trying to promote investment in the sectors to move away from higher quality imports to producing high quality domestic goods as well.

Valid, and this is  something we saw in dairy categories 5 years back as nearly all fresh milk was being imported and China was looking to ramp up domestic production to meet soaring domestic demand.

4) Conditions have changed in the last 7 years that perhaps, and perhaps there is something else that is on the mind of Chinese negotiators.

Not sure about you, but I have often found that there are often multiple issues that are under the surface, and I am pretty confident in saying that I bet China is looking to renegotiate some things that they felt forced to agree to 7 years ago.

5) China may be just be showboating their new found power a bit, putting the others in their box

I am not sure if any of the above make much sense, or if the reach into the core issues, but I think it is important to understand where China is coming from.  Not that they require special treatment, but they have been the elephant in the back of the room whose economy has been growing 10%+ each year… and they are going to look to find ways to ensure that their interests are #1.  Perhaps 10 years ago, they were more willing to work with other developing countries as a bargaining tool, but as China comes out of its cocoon, it is sure to try to act like a big dog at times as well.

If anyone from within the agricultural sector has an opinion, or a better understanding of the talks, please share in the comments section

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One Response to “China Stands Up at Trade Talks”

  1. Posts of the Week: 7/28 - 8/3 | China Stocks Blog says:

    August 4th, 2008 at 1:10 pm

    […] China Stands Up at Trade Talks at All Roads Lead to China Interesting discussion of Doha. […]

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