Soybean: An opportunity of USA-China trade war for Pakistan

The year of 2018 clearly embarks the USA-China trade war and voices can be heard from the political portfolios of both countries. In April-2018, President of United States, Donald J Trump introduced new Tariffs on steel and Aluminum related goods of China and various other countries.

In retaliation, China also stepped in trade battle and imposed a 25% tariff on a range of USA goods including Soybean, that is currently in the much firing line and quite a risk for China. This food commodity is feeling the impact of this trade war and is the highest value export commodity of USA worth of US $ 14 billion annually. China is the largest consumer of Soybean, but can’t grow enough, so reliant on imports to meet its demands. In 2017, 57% of the USA exports of Soybean headed to China, that was of the volume of 32 million metric tons. But, the exports to China are going down and have fallen to the volume of 8% in June 2018 only. Although China has 2-year stock of Soybean, the traders are shifting to Brazil and Argentina for fulfilling the demands of the voracious appetite of China and to get lower prices of soybean-associated commodities. Sinograin the stockpiler of the China grains has confirmed that they are going to pay an additional 25% tariff’s (6 million $) on the 70,000 tons of the soybean imported from the USA. The USA wants to secure its business interests, but according to experts, USA farmers will not be able to regain the share of export, lost in this trade war.

Tassadduq Rasool (Department of Agronomy, University of Agriculture, Faisalabad)
Author

China has only 15% arable land, that makes the land precious for China and is capable to produce only 10% of the domestic needs. According to the South China Morning Post, Russia has offered 2.5 million acres (1 million hectares) of land to Chinese farmers and several companies has expressed interest in the cultivation of this land for soybean. China has also imported 8,50,000 tons of soybean from Russia in between July and May last year. The Heilong province of China is getting importance, as it has a suitable environment for soybean cultivation. China needs to ramp up the domestic production and fill the gap. The Government has advised farmers to switch their production from corn to soybean, as the gap created by USA soybean will not be covered easily and it will cost high to Chinese consumers at higher tariffs. China is lagging behind for years for being self-sufficient in Soybean. So it means, they have to be reliant the on others. Soybean is an essential component of Chinese diet and has various uses like cooking oil, sauce tofu, and animal feed. The cancellation of orders of Chinese traders with USA farmers would create an opportunity for growers in Pakistan, as its prices can go up. It can provide sufficient profits comparable to other agricultural outputs. So, limiting the imports of soybean by China from the USA is creating an opportunity for Pakistani farmers, as a new market, as the USA is going to lose its largest customer.

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The decline of USA soybean orders from China can be a good opportunity for Pakistani farmers and prospering economic relationship with the neighboring country. According to some analysts, the potential of exports is too high that, there are not sufficient places for China to replace the American soybean soon and Chinese traders would even buy it at higher 25% tariffs from the USA. This trade war is expected to be further intensified, as Washington will impose more tariffs on Chinese goods on August 23, 2018.

Soybean is an edible grain, used to make cooking oil and animal feed. It has gained popularity due to excellent nutritional value, unique composition and health benefits. The protein content is about 40-42% and oil 18-22%. China and Pakistan have proved excellent peaceful neighbors and are working on many grounds to strengthen their relationship, after the CPEC initiative. But, according to Sun Weidong, Chinese Ambassador to Pakistan, we are not producing the goods, that China needs. This is causing a huge trade imbalance, favorable to China but not to Pakistan. Pakistan exports to China are continuously declining, since the 2013-14. While the India-China trade volume is about $ 84.44 billion (2017), as compared to the Pakistan-China bilateral trade volume of about $13.8 billion. Although Pakistan has sufficient soil and water resources and favorable environment for its cultivation, soybean is a neglected crop. It can be cultivated both as zaid rabi and autumn crop. The proposed rotations for soybean cultivation are wheat-soybean-wheat, rice-soybean-rice, and cotton-soybean-cotton in Punjab. I believe, Pakistan has good potential to export soybean, as Chinese demands are too high that, either they will need to restart soybean imports from the USA at higher duties, or they have to cut down their livestock production, under the implying high prices on the domestic market.

Mujahid Ali

I am a PhD scholar in Institute of Horticultural Sciences, UAF and Visiting Lecturer in Horticulture Department in University of Sargodha.

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