The Seeds of the US-China Trade War Go Way Back

Same. Same. Same. Same. 

I am often asked why I blog. One of the reasons I always give is that I learn so much from it. One of my favorite blog learning devices is asking super-smart people to guest blog on here, especially when their expertise is different from that of the blogging lawyers at my firm.

Way back in 2014, we had Lucas Blaustein write about US-China agricultural relations. Lucas is now in a high level agricultural position with the US Foreign Agricultural Service, but back then he was the Container/Feed Ingredient Manager for a global transportation company focused on food with extensive China experience, fluency in spoken and written Mandarin and a Masters in Agribusiness.

His post, entitled Hit Us Where It Hurts: China’s Ban on U.S. Agricultural Products Grows, focused on how China was improperly banning US corn products so as to favor its own corn producers:

But if all Lucas had done was to write about China blocking foreign products to secure its own competitive advantages, I would not be re-running his post today. Sure, that is relevant in that a huge part of the US-China trade dispute stems from actions just like these, but China has done enough things during the last five years that there is no great need to focus on how ruthlessly it treated America’s corn farmers back then.

No, what has caused me to re-run Lucas’s post is a comment he left in response to a comment left by another of our readers. In that comment, Lucas essentially lays out what has given rise to the US-China trade war we have today:

If the United States desired, it would be much easier for us to cripple the Chinese economy, than for the Chinese to cripple ours. While you commonly hear, “everything is made in China,” few of the staple items the U.S. consumes are actually made in China, and most items that are actually necessary to our society can be manufactured elsewhere. Think food, fuel, transportation, weapons… (all are of these are domestic or ally nation industries).

China is still an export driven economy, with no other major export markets for its goods besides the EU and North America. Were the United States to put in place a ban on any number of China sourced items it would cause immediate harm, and potential civil instability in the People’s Republic. The easiest way for the United States to inflict harm on the Chinese economy, would be to ban Chinese companies and individuals from listing on the stock market.

Few in the United States see economic punishment as a constructive step. Engagement is usually the best way to solve these kinds of difficult problems. However, engagement has been so far unsuccessful between the current U.S. and Chinese administration.

What the United States must be careful of economically, is providing China with too much access to our market sectors in the hope that China will reciprocate. Two excellent and very recent agricultural examples of the United States opening up or approving a business opportunity to Chinese companies are: 1) the Smithfield acquisition by Shuanghui; and 2) the approval of Chinese chicken processing plants. Both were approved in the hopes of China relieving some of its restrictions on U.S. agricultural products. Sadly, neither the Smithfield or chicken import approval has resulted in similar market openings. Now American chicken companies have been exposed to Chinese competition, with major protein imports to China like beef and pork still mostly banned.

Telling was what one of the congressmen had to say about the Chinese acquisition of Shuanghui, “we are allowing a Chinese company to do in America, what an America company would not be allowed to do in China.”

Plus ça change, plus c’est la même chose.

Brief sidenote: Some of the international litigators at my law firm had a case a few years ago against Smithfield Farms, involving millions of dollars of pork that were bound for Russia but became subject to US trade sanctions against Russia. What so struck our lawyers was how Smithfield Farms, which had once been a bulwark of an American food/farm company, acted in so many ways like a Chinese company in China. Not necessarily a negative thing, but definitely unusual.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.