ship
January 30, 2019

Will China Change Its Fundamental Business Practices? Probably Not.

 |  By: Rhonda Brooks

Tom Vilsack served as the U.S. Secretary of Agriculture under President Barack Obama from 2009 to 2017. He currently serves as president and CEO of the U.S. Dairy Export Council. He spoke with Farm Journal Editor Rhonda Brooks earlier this month about his trade outlook. The following are four questions she asked and the answers that Mr. Vilsack provided.

1. What can farmers expect to see happen with exports, once the trade tariffs with China are removed?

Once the tariffs are removed, we’ll all work very hard to put this chapter behind us. Still, I think the big question here is the extent to which the United States genuinely wants significant changes in the way China does business. If it's about protecting intellectual property, if it's about more foreign investment being authorized, I think China can do those things relatively easily and are probably willing to do those things. The challenge is going to be when you ask them to change their rules for the joint ventures and partnerships requiring Chinese control, when you essentially ask them to reduce the way in which they subsidize state-owned enterprises. That's more fundamental to the way they do business. Whether or not they're willing to make those changes, in my view, is still a question. If I'm right about this, that the Chinese are not willing to make those rather fundamental changes, then it's going to be a question of whether President Trump sees enough sales and protections for U.S. intellectual property to be able to declare victory, and we move on? I think that's the fundamental question that still has to be answered.

Vilsack was also recently on AgriTalk radio to talk trade and U.S. agriculture. 

2. What’s your perspective on our new trade agreement with Canada and Mexico?

With regard to Canada, I think we need some reassurance that the terms and conditions of the agreement are actually implemented. Canada has to be more transparent with its activities relative to the dairy market. We've seen for far too long Canadians agreeing to do one thing, and then utilizing a loophole or utilizing some tactic to basically sort of disregard what they've previously agreed to. We need to have a better understanding of exactly what the Canadians were doing in terms of the class seven elimination. It's great that it's going to be eliminated, but it's been replaced with something. The question is, can that something be maneuvered and manipulated to the point that it's a class seven by a different name? And so, we need greater transparency. If we don't have that kind of reassurance, then that obviously gives us pause for concern. The same thing is true with market access; do we really have that market access? Are we going to play some of the same games that have been played before? For example, when we had a quarter for fluid milk, the Canadians would essentially say, ‘The milk that's coming across the border from our customers going into American grocery stores counts toward the fluid milk quota.’ No one's keeping track of all those customers coming across the border. Why are they coming across the border? Well, because dairy products are a lot less expensive in America, because we don't have the supply management system, they have a Canada. So you know, with that kind of situation I think we want to be very wary of how hopeful we are. With Mexico, it continues to be a strong market for us, our No. 1 market, and we’d like to see the retaliatory tariffs lifted in Mexico now.

3. What trade priorities do you believe the U.S. should have, moving forward, with countries other than China, Canada and Mexico?

We've continued to have strong dairy demand in other markets. The Middle East and North Africa have picked up some of the slack. And certainly, Southeast Asia, Japan and Korea have been areas where we've been able to do business.

4. In closing, is there anything else you would want to share with American farmers?

I think there's obviously a significant need for infrastructure investment in the U.S. And in some way, somehow, public-private partnerships need to be developed to encourage that investment. Certainly, in rural areas, that's going to be required. We're not going to have access to broadband in rural places, high-speed internet in rural places, unless we have that public-private partnership activated in a meaningful way. And without better highways, without better lock-and-dam systems, we will lose the advantages we've had for so many years in terms of our transportation system. If we don’t address infrastructure needs, we're going to lose out to the competition. Trust me, as you travel the world, you're seeing many of our competitors investing a lot of their time, resources and money in improving their infrastructure systems, their ports, their rail systems and their communication systems. We need to get serious about this.

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