Illustration: Luo Xuan/GT

The 12th round of China-US trade consultations was held in Shanghai on Tuesday and Wednesday. The two sides conducted in-depth exchanges in line with the consensus reached by the leaders of the two countries in Osaka, Japan.

The two sides discussed the purchase of US agricultural products by China in accordance with its domestic demand and favorable conditions offered by the US. Before the consultations, some Chinese companies had inquired about buying soybeans, cotton, pork, sorghum and other agricultural products from US suppliers.

On the US side, it has announced the exemption of additional tariffs imposed on 110 Chinese industrial products and expressed willingness to encourage US businesses to continue providing supplies for Chinese companies.

China is the world's largest importer of agricultural products, while the US is the largest exporter. The trade of agricultural products between the two countries is a crucial component of bilateral trade relations. 

Agriculture has been a key area to which the US has paid attention. As a major power with a developed agricultural sector, the US has advantages in geographical location, natural endowments on productivity factors and technology innovations. US productivity of grain makes up one fifth of the world's total. Its corn and soybean production ranks first in the world and wheat ranks third. 

The US agricultural sector not only signifies the country's interest in economics and trade but is also associated with national security - it enables the US to have more of a say on global food issues.

The Chinese agricultural sector is characterized by small-scale farming that lacks industrialization. China's agricultural output is huge but still deficient on a per capita basis. 

The potential import demand for high-quality agricultural products will be high. The differences in natural endowment and development have determined that bilateral agricultural trade between China and the US is complementary enough to be mutually beneficial.

The US has an agricultural trade surplus. Before the trade friction in 2018, China used to be the largest market for agricultural products from the US. US Department of Agriculture statistics show that US exports in 2018 to China were $9.2 billion, ranking fifth among US export destinations. In 2017, China was the second largest market for US agricultural products. 

China imported more than half of total US soybean exports that year. The agricultural products the US has been exporting to China include oil seeds, hay, distiller grains and dairy products. The US mainly imported fruits, dry fruits, vegetables and fish.

Agriculture trade cooperation between China and the US has great potential. The US will likely benefit more than China. 

First, with different comparative advantages, China exports more labor-intensive agricultural products while the US can sell technology-intensive ones. Both countries can complement each other in terms of product structures, quality and varieties.

Second, regarding the future outlook in demand, with the growing Chinese economy and improvement of income per capita, Chinese people's food consumption will be upgraded. The consumption demand for high-quality US agricultural products will steadily increase.

Third, China is increasing imports and further opening its relevant sectors. A further-opened agricultural products market, lower tariffs and non-tariff barriers, simplified customs procedures and the International Import Expo held every year will stimulate agriculture imports.

Fourth, China's per capita resource is limited, the country has to plan and utilize domestic and international markets as a whole. Expanding imports will provide sufficient agricultural products to the country and, at the same time, reduce the resource and environmental costs. Therefore, the Chinese agricultural sector will have a chance to step up in green and high-quality development.

Since the US instigated and upgraded trade conflicts with China in 2018, agricultural products have become the main target of tariff retaliation on both sides. The trade frictions have dealt a blow to bilateral agricultural trade. Moreover, they have weakened the competitiveness of companies in both countries and fostered their competitors. The impact has sprawled to upper and lower ends of the industrial chain. A trade row can only hold back purchases and deals on the market and trigger vicious price competition that disturbs the market environment.

Neither China nor the US will be the winner of the trade war, though so far it seems the US has been taking a bigger hit. One year since the trade conflicts broke out, Chinese exports to the US have fallen 2.6 percent and imports 25.7 percent from a year before in June. China received 62.3 percent of total US soybean exports in 2016. The ratio plummeted to 17.9 percent last year due the trade conflicts.

The impact of the China-US trade row has proven that cooperation is the only wise choice, otherwise both sides will suffer. Complementary bilateral agricultural trade and its potential are calling for cooperation. Not to mention that the US may take a bigger share of the cut.

Now the trade talks have resumed and the next round of consultations is set for September. The two sides should seize this opportunity to reach a mutually beneficial agreement, and build coordinated, cooperative and stable China-US economic relations. This would be in the best interests of the two countries and the world.

The author is a professor and head of the Economics and Trade Department with the College of Economics and Management at China Agricultural University. bizopinion@globaltimes.com.cn


Newspaper headline: China-US agricultural trade calls for cooperation