By DOUG SCHMITZ
WASHINGTON, D.C. — When Chinese officials were in Washington to discuss trade relations last week, the National Pork Producers Council (NPPC) urged the two nations to quickly resolve their trade differences. In addition, NPPC asked China to make a minimum $3.5 billion purchase of U.S. pork over the next five years (at least 350,000 tons each year).
“Prior to China’s imposition of tariffs on U.S. pork, China was buying about $600 (million) to $700 million dollars of pork products,” said Dave Miller, recently retired Iowa Farm Bureau Federation director of research and commodity services.
“If China responds favorably to a request that China buy $3.5 billion of pork, (it) would signal a significant movement by China toward reducing the trade deficit between China and the U.S.”
The NPPC said China is the largest consumer of pork in the world, making it a top market for U.S. pork exports over the past several years. In 2017, the pork industry shipped $1.1 billion of product to China, making it the No. 3 export destination for U.S. pork.
Currently, pork represents about 15 percent of the Consumer Price Index in China. “China has been a tremendous market for U.S. pork, and – absent of numerous trade barriers – probably would be our No. 1 export market,” said Jim Heimerl, NPPC president and a Johnstown, Ohio, farmer.
“But never mind China’s preexisting barriers on U.S. pork; the 50 percent punitive tariffs on U.S. pork have slowed our exports to a trickle.”
According to NPPC, U.S. pork producers now face tariffs of 62 percent on exports to China, which in early April 2018 imposed a 25 percent tariff in response to U.S. tariffs on Chinese steel and aluminum. Last June, it added another 25 percent duty in retaliation for the U.S. tariffs levied on a host of Chinese goods because of China’s treatment of U.S. intellectual property and forced transfers of American technology, the NPPC stated.
China already had a 12 percent tariff on U.S. pork, and the country has a 13 percent value-added tax on most agricultural imports, with other non-tariff barriers also slowing U.S. pork exports there over the years.
Dermot Hayes, Iowa State University economist, calculates that because of the 50 percent punitive tariffs, U.S. pork producers have lost $8 per hog, or more than $1 billion on an annualized basis. Producers have lost an additional $12 per hog, collectively $1.5 billion in the industry, because of Mexico’s punitive 20 percent tariffs in retaliation for U.S. metals tariffs.
Hayes said if China purchases at least 350,000 tons of U.S. pork each year for five years, the total deal would be worth approximately $3.5 billion in sales. He explained that would put “a significant dent in the U.S.-China trade imbalance” and create 5,250 new jobs in the United States.
He said the timing for the purchases is good, since China needs to import more pork to mitigate the impact of African swine fever (ASF) on the Chinese pig herd. And Miller said China has lost at least a million hogs to ASF, adding “some unofficial estimates put their losses much higher.”
“Clearly, China had a need for pork – especially in their southeastern cities due to current transportation restrictions on hog and pork movement from northeastern hog production areas to southern areas,” he added.
According to estimates released last September by the National Pork Board (NPB) in Des Moines, U.S. pork production in 2019 is expected to increase by 656 million pounds.
“If all this supply goes to support higher export demand, we will likely see a net reduction in per capita availability in the domestic market and higher pork prices,” the NPB stated. “The decline in per capita availability will depend greatly on how quickly ASF spreads in China and the elasticity of pork demand there.”
On Jan. 22, China offered to buy $1 trillion of U.S. goods over the next six years, Investor’s Business Daily reported.