In an interesting move, Japan has pledged to buy excess US corn supplies that China refuses to purchase in light of the trade war:
President Donald Trump announced the U.S. and Japan have struck a preliminary trade deal on $7 billion worth of goods. The deal is expected to be formally signed in September, The Hill reported.
Trump said Japan will be buying U.S. corn. The deal also includes digital products.
“We have been working on a deal with Japan for a long time,” Trump told reporters at the Group of Seven summit in Biarritz, France, on Aug. 25, 2019. “It involves agriculture. It involves e-commerce. It involves many things. We’ve agreed in principle.”
U.S. Trade Representative Robert Lighthizer said the deal focuses on agriculture, industrial tariffs and digital trade. Japan will buy up $7 billion of U.S. agricultural products, mostly corn, under the agreement, Reuters said.
Japanese Prime Minister Shinzo Abe noted that most of the “potential” corn purchases would come through the private sector, Reuters reported.
“We’ve agreed to every point, and now we’re papering it and we’ll be signing it at a formal ceremony,” Trump added.
The report is good news for American farmers, who have seen their agricultural exports take a hit as the U.S. and China engage in a trade war. The U.S. is on pace to export $137 billion in products in 2019, which would be down from $143.3 billion in 2018, according to Statista data.
In 2017, China imported $23.8 billion worth of U.S. agricultural products – 17% of total U.S. exports. From 2000 through 2017, U.S. agricultural exports to China have increased over 700%, according to the Minnesota Department of Agriculture.
Through June, though, U.S. soybeans exports – the top ag export to China – were down by 12 million metric tons compared to last year after China announced a 25% tariff on them.
“All of the data that we have seen from both US and Chinese economists, is that throughout 2018, the tariffs actually had zero impact on China’s economy,” Erin Ennis, senior vice president of the US -China Business Council, said this summer at the Agriculture Transportation Coalition’s annual meeting. “China has yet to feel the pain of the tariffs that the United States has put in place.
“The hard facts are that as long as the tariff battle is in place and China has retaliatory tariffs against U.S. agriculture products, many exporters are going to be priced out of the market,” she added.
The U.S. exported approximately 17% of its 14.6 billion bushels of corn produced in the 2016-2017 crop year, according to the U.S. Grains Council. Twenty-one percent of that export went to Japan, making it the second largest export market behind Mexico (25%).
This year has seen a decline in corn exports of 9.4% year-to-date from 2018, although the amount of corn heading to Japan is up 16%.
“Given the existing volatility and uncertainty in global markets, today’s news that the administration is making progress in talks with Japan, one of our most important trading partners, is a welcome step in the right direction,” Myron Brilliant, executive vice president and head of international affairs, U.S. Chamber of Commerce, said in a statement. “However, the U.S. Chamber strongly urges the Trump Administration to continue its efforts to reach a comprehensive, high-standard agreement that addresses the full range of U.S. trade priorities from services and intellectual property protection to regulatory barriers. By securing that broader agreement, the administration will spur significant economic growth, create U.S. jobs, and open up other avenues for expanding our market access and commercial ties to the vital Asia-Pacific region.”
The U.S. and Japan began negotiating a trade deal in late 2018. The two countries totaled $297.5 billion in trade in 2018, according to the Office of the United States Trade Representative. The U.S. exported $75 billion worth of goods to Japan in 2018, up 10.9% from 2017. Japan imported $13 billion in agricultural products from the U.S. in 2018, led by corn ($2.8 billion); beef and beef products ($2.1 billion); pork and pork products ($1.6 billion); soybeans ($947 million); and wheat ($698 million).
According to Politico, the trade deal does not lift the 2.5% tariff on Japanese vehicles or major auto parts exported to the U.S.
“There are a series of industrial tariffs that are being reduced. Auto tariffs are not in that group,” Lighthizer told reporters at the G-7.
Details on the digital products and industrial tariffs have not been released yet. (source, source)
If this does go through as it has been declared, it is big news.
China is a large producer of many goods, industrial and agricultural. She is also a tremendous consumer of food, demanding more than what she can effeciently produce for her people. Japan is in a similar case, as it has been known for over a decade that she has trouble producing enough food to feed her people given the small land area that is Japan and her population of 125 million. Like China, Japan relies on foreign trade to purchase large amounts of the foods that she needs in order to survive.
While both nations are food “vulnerable,” the Chinese situation is far worse than Japan’s because China has approximately ten times the number of people as Japan does and with a far more inefficient management of her land resources. Pollution in China is rampant, and food quality is many times questionable. China has a history of selling intentionally low quality or even non-human consumable food for human consumption to foreign nations, and she also treats her own people in a similar way. Food that states on the label “Made in China” is as a general rule not to be trusted for this reason even in the US (foods from other parts of Asia are fine).
China has a long history of making decisions in the name of Chinese nationalism on the basis of impulsive anger or as a reaction to a perceived offense. This has also been her historic downfall each time because as the historical record consistently demonstrates, when she starts doing this is when she begins to engage in behaviors that isolate her and turn her against herself, eventually leading to internal conflict where out of nothing less than racialism and pride she tears into herself, destroys her nation, and creates the conditions for foreign invasion.
China right now seems to be doing this as she is threatening more tariffs in response to President Trump’s rhetoric as is cutting off agricultural relations largely with the US. These decisions are clearly being made out of nationalistic pride, since China largely depends on the US for her food stability. She has been seeking other providers and cultivating relations with Southeast Asia for this reason as well as other nations, but she is still largely dependent on the US. Her cutting off relations with the US, while she may want to, does not ultimately serve her long-term interests.
Likewise, there is the other problem of food stocks. China is highly vulnerable to shocks in food prices, and if there was ever to be a reason for a decline in the food supply- be it a disease, famine, or war -China would not be able to supply enough food or sell enough at a price that her people could purchase it for, and as a result she is susceptible to mass starvation, another unfortunate fact of Chinese history that has a very nasty habit of repeating throughout the millenia. She as a nation generally does not have food “stored up,” and what little she does have today surely will only go to feed the highest ranking members of the Communist Party. Chairman Mao was not ashamed of watching tens of millions of his own people that he so claimed to represent perish from starvation, so why would his philosophical and political descendants be any different in their perspective?
The Japanese are far craftier, industrious, and better organized than the Chinese have ever been. This is not to say that Japan should EVER be considered an “ally” of the US. This is a horrendous mistake, because if anything, the Japanese still have a score to settle with the US over the bombings of Hiroshima and Nagasaki, and the Japanese are not a forgiving people. Criticize the Germans as one may, but Germany admitted her involvement in the Aktion T-4 eugenics program and other war crimes, whereas the Japanese people and government not only deny their war crimes such as the infamous Unit 731 eugenics program, but they build shrines honoring the criminals as “national heroes” without the least bit of any sense of shame.
The Japanese know their weaknesses, and one of them is food. They are also close allies by force with the US, and so they know they cannot break away from her right now. If anything, they will seek to maintain and build closer relations because in fact they do hate the US but will make sure to take everything they can from her to benefit their own goals before attacking. Since the US is very food-stable, one of the things that Japan must do will be to increase her national stocks of food as high as she can get them because in the event of a war, she will be forced to rely on them until she can secure a foothold in the Korean Peninsula and northern China, at which point she will see no problem in stealing all of the food from the local people to feed her nation while the Chinese starve to death by the tens of millions again as they so often have done throughout history. When this happens, it will be likely that the so-called “unity” of the Chinese military will be smashed and it will turn into a situation where every man seeks his own interests. Divided, scared, and starving, China will fall right into Japanese hands just as she did last century, and the same horrors will repeat again.
People are lauding Trump for making such an “amazing deal” with the Japanese, but who really benefits? The American farmers will be happy in the short term as will the rest of the country, but in a classic example of American short-term thought with little memory of the past or foresight for the future, she is making herself yet again a willing stepping stone for the revival of Japanese nationalism and militarism.
The Japanese have survived for thousands of years, and have been the terror of the Chinese. America has only been around for scarcely 250 years. There is a lesson to be learned from them, and that is to be wary, for the “great deal” today will likely become a forgotten “great regret” in the future.