Representing U.S. soybean producers, and the interests of other U.S. commodity groups, the American Soybean Association (ASA) today testified at a U.S.-China Economic Relations hearing before the United States Senate Committee on Finance. ASA told the committee that it believes improved behavior results from the constant application of even-handed pressure to respect trade agreements through discussions and negotiations. ASA and other U.S. agricultural organizations actively support this approach with China.

"ASA certainly does not support provocative measures that would try to force China to revalue its currency through imposition of punitive tariffs on imports of Chinese products," said ASA President Neal Bredehoeft, a soybean producer from Alma, Mo. "Such punitive rather than constructive measures are not likely to have the desired effect of changing China’s policies, and could trigger retaliation by China."

The soybean leader pointed out that on a previous occasion when the United States cut off grain exports to the Soviet Union in 1980, it sent a shock wave through world agricultural markets. Not only were the Soviets able to source wheat and soybeans from alternative suppliers, but other major U.S. customers decided the U.S. was an unreliable supplier. The Japanese, in particular, invested heavily in development of soybean production in southern Brazil, a country that has become the largest competitor for U.S. soybean exports and is rapidly emerging as an aggressive seller of cotton, sugar, livestock and biofuels products.

"Twenty-five years ago, U.S. policymakers convinced themselves that we could control global agricultural trade," Bredehoeft said. "Today, with the emergence of Brazil and other South American exporters, there can be no such mistake. In response to trade sanctions, China could easily replace U.S. soybeans and other agricultural products from other sources. The result would be the loss of a growing $3.0 billion soybean market for U.S. soybean farmers that has taken us 20 years to develop."

This year, the value of U.S. soybean exports to China is expected to reach a record $2.96 billion. This represents a seven-fold increase during a decade that has seen China emerge as the largest foreign buyer of U.S. soybeans. The 440 million bushels the U.S. will likely export to China in 2005, represent 40 percent of total U.S. soybean exports, and 18 percent of last year’s total U.S. soybean harvest.

"It is impossible to overstate the importance of China as a market for U.S. soybeans," Bredehoeft said. "Prospects for continued rapid growth in Chinese soybean imports are excellent."

China’s population continues to expand and is becoming increasingly urban. As a result of dynamic economic growth, more Chinese consumers can afford and are seeking a higher standard of living, including more protein and vegetable oil in their diet. China’s ability to supply these needs through increased production of soybeans and other feeds and oilseeds is limited, so most of the increase in demand will be filled by imports.

Development of Chinese demand for soybeans has not been driven only by demographics and economic growth. Twenty years ago, ASA established a presence in Beijing to develop what was then a small market for U.S. soybeans.

"Working with the U.S. Department of Agriculture’s Foreign Agricultural Service and the soybean checkoff, ASA has undertaken a variety of programs to educate the Chinese on the economic, nutritional, and other benefits of utilizing U.S. soybean meal for animal feed and soybean oil for human consumption," Bredehoeft said. "These efforts have clearly paid off."

ASA has also worked very closely with the current and previous Administrations to increase access to the Chinese market through trade and political negotiations. ASA provided specific objectives to U.S. negotiators during talks on China’s accession to the World Trade Organization, and strongly supported approval of that agreement. ASA looks now to the current negotiations under the Doha Development Agenda to further improve the rules governing market access.

"While China is U.S. soybean farmers’ largest export market, our industry’s trade relations with China have not been without difficulties," Bredehoeft noted. "We have seen soybean exports disrupted in the past by the imposition of new regulations as well as arbitrary and unscientific import inspection procedures. However, we have found the best way to resolve these issues is through steady and even-handed dialogue, as well as political pressure. We are hopeful that China is coming to accept greater market access and commercial trade rules as it fully participates in the world economy.

"China is a vital and growing market for U.S. agricultural sales," Bredehoeft said. "It is one of the strongest arguments for supporting efforts to open world markets through the Doha trade negotiations. Any action to force changes in China’s economic policies by imposing punitive tariffs would have the most negative consequences, not only for U.S. soybean exports, but for efforts to further liberalize the global trading system."