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The Truth about Trade

RSS By: Dean Kleckner, AgWeb.com

Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.

The Truth About Technology & Trade With China

Dec 19, 2013

 By Tim Burrack: Arlington, Iowa

 
Tensions around the Pacific Rim have taken a sharp turn for the worse, ever since China declared a new air-defense zone and projected its power over a small set of islands in the East China Sea.
 
Vice President Joe Biden rushed to Beijing to confer with Chinese President Xi Jinping, but nothing seems to have come of their meeting. Diplomats in Australia, Japan, and South Korea now worry that China’s sudden aggression will lead to a conflict.
 
In a separate incident, unfolding below the headline-grabbing island dispute and possibly obscured by it, China fired shots in an economic war: It rejected several shipments of corn grown in the United States, in a trade spat that hurts American farmers and threatens the future of food production and distribution through trade.
 
China is the world’s most populous country, and in recent years it has become a major importer of corn, mostly used for animal feed. Just six years ago, the Chinese were still net corn exporters. In recent days, however, they’ve turned away more than 120,000 metric tons of U.S. corn, spread across at least three provinces and five cargoes. Inspectors refused the corn because they discovered a trait for pest resistance that China has not yet approved.
 
On the surface, this looks like just another episode in the global controversy over genetically modified crops.
 
But that’s not the real reason for China’s destructive behavior. This is a trade issue. It’s simply playing economic hardball, trying to escape from purchase contracts it signed months ago when corn prices were higher. And it’s using a phony fuss over biotechnology to distract us from this important reality.
 
The technical name of the corn in question is MIR162. It contains a trait that fends off insects, building stronger and healthier plants that produce more grain. As with so many GM crops, regulatory agencies around the world have approved this one for planting, harvesting, and consuming. It’s just another safe crop made possible by the remarkable advances in biotechnology, helping us grow more food on less land.
 
In other words, MIR162 is a conventional tool of modern agriculture. People in the United States, Argentina, Brazil, the European Union, Japan, and Mexico rely on it.
 
Yet China has not approved it for import. Its regulators have failed to cite any concerns about quality or safety. Instead, they simply have dawdled on an application they should have been approved long ago.
 
The Chinese probably would not behave this way if corn were selling for $7 per bushel, as it was earlier this year. Today, however, corn sells for about 60 percent as much—and so the Chinese have decided, with astounding cynicism, to use biotechnology as a trade barrier so they can cancel purchase contracts.
 
This is bad-faith behavior. It violates the norms of acceptable business practices and slashes the value of American goods, hurting the farmers who grew the corn in the first place.
 
Meanwhile, the media’s coverage of the incident has suggested that the dispute amounts to nothing more than a new wrinkle in the debate over the safety of biotechnology. The unspoken assumption is that fair-minded Chinese regulators have honest concerns about the safety of corn grown in the United States.
 
Let’s be clear: Food grown in the United States is the safest on the planet. Our trade customers have nothing to fear from it.
 
The U.S. Grains Council has called upon China to admit these corn shipments, and perhaps it will. Yet China’s reneging already has forced Americans to forfeit hard-earned revenues and threaten future shipments.
 
The long-term answer, however, is regulatory harmonization. Richard Fisher, president of the Dallas Federal Reserve Bank, made this important point in a speech last week.
 
Around the world, new varieties of crops must pass through a patchwork of approval systems. It’s complex and inefficient—and, as we’re seeing right now with China, it creates opportunities for mischief, this time serving a double-whammy against both trade and technology.
 
A better system would let a rigorous approval in one responsible country allow for a simpler and quicker approval in another. The devil is in the details, of course, and the undemocratic rulers of China won’t be the first to sign on.
 
Yet this is the way forward—and it must become a priority in trade talks with our friends.
 
Tim Burrack raises corn, soybeans and pork on a NE Iowa family farm.  He serves as Vice-Chairman and volunteers as a Board Member of Truth About Trade & Technology (www.truthabouttrade.org).
 
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