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Retaliation against US soy farms is unlikely

(China Daily/Agencies)
Updated: 2009-09-28 09:00

The US government gives large amounts of subsidies to its farmers and dumps soybeans in China, Chen Dongqi, vice head of the macroeconomic institute of the National Development and Reform Commission, told a recent conference.

He suggested the United States was guilty of double standards after slapping a 35 percent punitive tariff on China-produced tires this month. China hit back by saying it will investigate US shipments of auto parts and chicken meat.

China imported a record 29.9 million tons of soybeans in the first eight months of the year, around 40 percent of which originated in the United States.

A senior manager at China National Cereals, Oils & Foodstuffs Corp (COFCO), China's top food importer and exporter, confirmed that China had already looked into taking action on US subsidies for soybeans shipped to China.

"This proposal was raised earlier in the year. China's government is quite rational on the issue. The government doesn't want to have a trade war. It's keeping calm over the issue," said Li Ming, COFCO's assistant president and general manager of the company's agri-trading and logistics division.

Tariffs unlikely

China has attracted record import volumes this year thanks to the government's stockpiling campaign, in which it offers to buy local crops to shore up farmers' incomes. That, in turn, sets a minimum price, opening the door to a flood of imports when global prices are lower.

Related readings:  Soybean imports set to rise  Cold soybean auctions may prompt hot actions  COFCO setting up soybean processing plant in Guangxi  China's soybean imports surge in 2008

But tariffs on US soy are unlikely. China was already dependent on cheap and plentiful foreign supplies even before a long drought hit its major growing regions in the northeast.

"There is no other source of cheap soybeans except the United States until at least March or April," said Nobuyuki Chino, president of Tokyo-based grain trading company Unipac Grain. In later months, beans from Brazil and Argentina make up the bulk of imports.

"Even if the US government has imposed duties on Chinese tires, I don't think they will take such an action," he said.

China might be eager to retaliate against Washington, but hitting the soybean sector would not be the right way to go about it, a Chinese analyst said.

"The soybean trade volume has reached around $10 billion now, while tire exports amounted to $2.2 billion, so China won't choose soybeans to protest against the United States," said Qin Pei at Guangtong Futures.

China's concerns are not new. Beijing conducted a study into US farm subsidies last year, but concluded that safeguard tariffs on soy imports would be impossible. It has since issued subsidies to its own soybean growers and crushers.

China remains uneasy about what it sees as a growing willingness on the part of the United States to resort to trade barriers.

Premier Wen Jiabao vowed in a speech at the World Economic Forum in Dalian recently that China would "fight resolutely" against all kinds of protectionism.