For the week of Nov. 22, 1999

The China Factor in American Agriculture

By Stewart Truelsen

Just as the Soviet Union was a major factor in American agriculture in the 70s and 80s, so can China be in the first decade of the new millennium. Sales to the Soviet Union helped launch the U.S into an era of export market growth. Although Japan was the most important customer for American farm products, it was the big grain deals with the Soviet Union, always couched in secrecy until announced, that propelled commodity prices to new highs.

Now, if there is to be another wave of export market euphoria from any single market source, it will have to come from China. But first China must gain admittance to the World Trade Organization. A big step was recently taken when the U.S. reached agreement with China over trade matters.

In announcing the agreement, President Clinton took special note of agriculture's stake. "In opening the economy of China, the agreement will create unprecedented opportunities for American farmers, workers, and companies to compete successfully in China's market, while bringing increased prosperity to the people of China," said Clinton.

American Farm Bureau Federation economists suggest that agricultural exports to China could triple over the next three to five years. Last year, the U.S. exported $1.3 billion in farm products to China. The figure could easily surpass $3 billion over time, led by soybean products, corn, wheat and cotton. Farm Bureau also sees great potential for rice, meats, poultry and citrus.

The agreement to get this ball rolling took six days of what has been described as "grueling talks" between U.S. and Chinese trade negotiators. In the end it was intervention by Chinese Premier Zhu Rongji that sealed the deal. Zhu has been trying to keep China's economic reform program moving ahead, but it hasn't been easy.

Bates Gill, senior fellow in foreign policy studies at the Brookings Institution, writing in Foreign Affairs magazine, said China has exhibited a "fundamental ambivalence about the benefits of globalization and open markets." According to him, Chinese Communist leaders are worried about the vulnerability of their economy and fear American economic, political and cultural dominance. In the summer there was even speculation that Premier Zhu might be purged because of his initial failure to get China into the WTO and because of the generous trade concessions he offered. Whatever problems existed for Zhu have dissolved for now. That is very good news for American farmers.

A group of Farm Bureau leaders was present when Premier Zhu visited a northern Illinois farm last April. His keen interest in American agriculture was obvious. When given the chance to see a new combine, Zhu eagerly jumped aboard. He also had a private meeting with American Farm Bureau Federation President Dean Kleckner. If progress on trade with China continues, it will be a hopeful sign for the American farm economy. It could signal the next big round of export market growth.