Outlook 2017: Ag and the whims of US-China relations

On December 12, China filed a complaint with the World Trade Organization over the methodologies used by the US and Europe in determining that China’s is a “non-market economy.”

Three days later, the US filed its own WTO complaint against China’s tariff rate quotas on rice, wheat and corn, claiming they disadvantage American exporters in contravention to Beijing’s membership commitments.

These were only the latest in a series of recent indications that agriculture has become a prominent theater in US-China relations at a moment when the relationship faces a range of possibilities virtually unthinkable mere months ago. In the year ahead, the darker currents swirling within the relationship threaten to effect sentiment surrounding agricultural investments made with Chinese demand in mind.

During his campaign, President-elect Donald Trump pointed to China as the main beneficiary of what he called poorly-negotiated trade deals and business practices that disadvantage American workers. In the weeks since his victory, Trump has indicated a willingness to leverage bedrock principles of the diplomatic relationship with China in his effort to win economic concessions from Beijing.

Given his tough talk on China, Trump’s selection of Iowa governor Terry Branstad as his ambassador to Beijing surprised some observers expecting a more confrontational pick. Branstad’s credentials for the posting are based largely on a personal connection with Chinese President Xi Jinping forged during an agricultural exchange during the 1980s, and his elevation suggests a hope that agriculture might serve as a ballast as the bilateral relationship hits choppy waters.

If this proves to be the case, managers pursuing agricultural strategies involving China as an export market will be well served making their own judgement about how well such a strategy will work.

Some within the US agricultural industry express confidence that American agriculture’s well-deserved reputation for safety and quality among consumers will thwart any attempt to draw exports into a trade war between the world’s two largest economies, but a continuation of good weather in South America and an unpredictable US president could test nerves in 2017.