Block US soybean imports in response to tire tariffs

By Zheng Fengtian and Han Zhenhua
0 CommentsPrintE-mail, September 18, 2009
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The Ministry of Commerce is probing US dumping of cars and chicken onto the Chinese market in response to the 35 percent tariffs imposed on Chinese tires. But this mild response will not dampen the growing mood of protectionism in the Democratic Party. A better alternative would be to hit US farmers with curbs on soybean imports. This would enrage US farmers and put pressure on the Obama administration, while providing welcome relief for domestic soybean producers, who have been badly hit by massive imports of genetically modified beans from America. China sees the US tire tariffs as a violation of the World Trade Organization (WTO) rules and is threatening to file a formal complaint. The China Rubber Industry Association has condemned the decision as "unjust and unfair" and called on the Chinese government to retaliate. Alejandro Jara, deputy director-general of the WTO, said the US government's decision is "a cause of concern".

But simple denunciations will not change anything. Protectionism is an old trick rolled out regularly by the Democratic Party. Obama couldn't afford to antagonize China in the midst of the financial crisis, but now the recession is easing, old stereotypes are resurfacing. The sanctions on tires follow a pattern pursued by Obama's Democratic predecessors. This time the excuse is the need to protect 5,000 jobs in the US tire industry. But has Mr. Obama thought about how his move will affect the job market in China? Does he care how many Chinese will lose their jobs because of his protectionist decision?

The Ministry of Commerce is probing US dumping of cars and chicken onto the Chinese market in response to the 35 percent tariffs imposed on Chinese tires.

China can't afford to give US protectionists a smooth ride. We need to teach our partners the importance of mutual respect. The best way to do this would be to impose punitive sanctions on soybean imports.

Domestic soybean producers hit by transgenic imports from US:

Margins on domestic soybean production were not bad in the years from 1996 to 2000 when soybean oil could be sold for 4,000 yuan (US$585.8) to 5,000 yuan a ton. Domestic production reached about 17 million tons per year. But things changed in 1999 when overseas investors began to take stakes in the market. Oil production capacity jumped by 5 million tons in 2001, 2.8 million tons in 2002, and 13.5 million tons in 2004. The National Development and Reform Commission calculates that the processing capacity of soybean oil has reached 70 million tons, far greater than existing demand.

The market first dived in 2004 following a group purchase of American soybean futures by Chinese processors. The purchase was the result of fraudulent information circulated on the Chicago futures market. It was signed at the extremely high price of about 4,300 yuan per ton, which plummeted to about 3,100 yuan just one month later. The blunder cost the domestic oil industry more than 4 billion yuan. Many factories closed down. This gave overseas investors the chance to buy into the industry. By the end of 2005 foreign interests controlled 70 percent of the domestic soybean oil market. In April 2006, 64 out of 97 producers of edible oil were either wholly-owned foreign companies or joint ventures. Between them, they controlled 85 percent of the soybean market in China.

The takeover of the Chinese soybean market may have been planned even before the wrongheaded purchase in 2004. As early as in 1999, overseas investors started to import their transgenic soybeans to be processed in plants they had set up along the southeastern coast of China. That was the first step in their move to monopolize the market.

The takeover of domestic factories on the brink of bankruptcy following the 2004 soybean futures fiasco was the second stage in the multinationals' grab for the Chinese soybean market.

Multinationals have gradually forced the Chinese soybean industry into a supply chain that starts with cheap agricultural supplies from the Americas, where conglomerates control soybean prices by manipulating prices of soybean futures on the Chicago Board of Trade (CBOT), and ends at 64 manufacturing bases in China.

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