China is the fourth largest market in the world for U.S. ag products
today. China is the biggest wheat market in the world. It not only produces more wheat than any other country in the world, but it buys the most wheat. It has to, with 1.2 billion mouths to feed, and
more added daily.The U.S. and China have been moving toward a closer trade relationship. In a historic agreement last year, China agreed to reduce overall average tariffs for priority U.S. ag products from an
average of 31% to an average of 14% by 2004. Among other measures, China has also removed unjustified purchase restrictions on U.S. meat, citrus and wheat. For decades, China would not buy American wheat out of
Pacific Northwest (PNW) ports, because of undue concerns about a minor fungus called TCK. This trade barrier is no longer in place.
American wheat shipments can now be moved out of PNW ports to the
Chinese market. According to the North Dakota Wheat Commission, being able to sell U.S. spring wheat to China through PNW ports shaves $6 to $10 per ton (16 to 27 cents per bushel) off freight costs as compared to a
U.S. Gulf origination, previously the only option for servicing the Chinese market.
It means that wheat producers in the Northern Plains are now better able to compete with the Canadian Wheat Board for a share of
China's business. U.S. Wheat Associates estimates that if American farmers could earn just 40% of potential Chinese business, total U.S. wheat exports could expand by 10%. That's significant, given the fact that every
million ton of wheat exported means about five cents to the per-bushel price of wheat in the U.S.
China made trade concessions to gain U.S. support for China's entry into the World Trade Organization, as well as
Permanent Normal Trading Relations (PNTR) status. PNTR treatment of trading partners is the norm in international trade. In fact, only six countries currently do not have NTR status with the U.S. Under NTR,
imports from a trading partner are charged only the most favorable tariff rates granted by the United States. Products from countries not eligible for NTR are charged significantly higher rates of duty.
Rep. Charles
Stenholm, ranking Democrat on the House Agriculture Committee, says he cannot understand "for one second" why some groups (even a few farm organizations) and lawmakers would oppose NTR for China. We agree.
Naysayer opposition to granting China Permanent NTR status stems from some who want to punish China for its record on human rights, and others who seem to have a distrust of international trade.
We maintain that
forging a closer trade relationship with China will only serve as a stronger platform to influence other matters—including a more democratic form of government and greater freedoms for the Chinese populace.
We
also do not subscribe to the notion of some who seem to believe that "all trade agreements are bad." A reminder again that PNTR is not a trade agreement, but only a lower tax on imported goods already extended by the
U.S. to most other countries in the world. The separate agreement struck with China last year is far more straightforward and less arbitrary than say, the U.S.-Canada Free Trade Agreement. Trade agreements
are much like production contracts: they aren't inherently bad, but bad contracts are. And if terms aren't acceptable, just turn it down.
The terms of our agreement with China are favorable to U.S.
agriculture. The agreement, and China's inclusion in the WTO, promises to result in expanded market access; non-discriminatory treatment for U.S. agriculture products, goods and services; greater transparency in
regulation and licensing; and an overall business environment that is more market-based and rules-oriented. But its success is dependent in part by U.S. approval of PNTR and support for China's entry into the
WTO.
A Congressional vote on PNTR status for China is expected by the Memorial Day weekend. Should the U.S. government fail to pass permanent NTR status for China, it may very well be the largest trade
setback to U.S. wheat producers since the 1980 grain embargo of the Soviet Union. U.S. farmers cannot expand their markets if handicapped by unilateral trade barriers put in place by our own federal government, as would
be the case if China PNTR is defeated. The U.S., which prides itself as the world's capitalism leader, cannot afford to turn its back on strengthening ties with one of our most significant trading partners and one of
the largest trade frontiers on the face of the earth. PNTR status must be granted to China.
This "Association Perspectives" represents the views of the Minnesota Association of Wheat Growers, North
Dakota Grain Growers Association, South Dakota Wheat Inc., Minnesota Barley Growers Association, and the Minnesota Wheat Research and Promotion Council.
