Xi Jinping, China’s probable future leader, made an unusual pit stop during his tour of the US in March. Xi went to Muscatine, Iowa, a small town along the Mississippi River that he had visited 27 years before in his capacity as a local official researching pig farming.
Xi’s recent detour was a message to Americans, many of whom view China with apprehension: Chinese consumers are helping bring prosperity to the American heartland. China was the biggest foreign buyer of US agricultural goods in 2011, spending roughly US$20 billion. The majority of that was spent on corn, soybeans and pork, commodities that are the Midwest’s bread and butter.
Yet China maintains tariffs that limit imports of many US agricultural products, including rice and wheat. It also sets non-tariff restrictions on the import of pork and apples and effectively prohibits imports of beef, strawberries and fresh potatoes. According to a report last year by the US International Trade Commission, eliminating these barriers could boost US agribusiness by roughly US$4-5 billion.
An unlikely import
It is obviously in America’s interest to continue dismantling these barriers, but it is in China’s interest as well. Yes, the adjustment process would be a painful one for Chinese farmers. Yet it would benefit the Chinese consumers who are the crux of Beijing’s economic hopes. Consumers must pay for farm subsidies in some form, be it costlier domestic food or higher taxes.
But there’s a better reason for China to buy more of its food abroad. Growing grain requires a huge volume of water and arable land, both of which China lacks. Raising animals for meat is even tougher on the environment: It takes roughly four pounds of grain to produce one pound of pork and twice that for one pound of beef.
The amount of arable land in China is shrinking, and the country’s water situation is even worse. Ten Chinese provinces are already below the World Bank’s water poverty level of 1,000 cubic meters per person per year, according to Elizabeth Economy, the director of Asia studies at the US Council on Foreign Relations. Those 10 provinces together account for 45% of mainland GDP, 40% of agricultural output and more than 50% of industrial production.
Moreover, an alarming amount of the country’s remaining water resources are being drained away by inefficient irrigation systems. “With more than four-fifths of all Asian water withdrawals being channeled to produce food, water literally is food in Asia,” Brahma Chellaney, a professor at the Centre for Policy Research in New Delhi, wrote in his book “Water: Asia’s New Battleground.”
China will never be able to import water; it is simply too costly. Water purification and desalinization projects are also expensive. But the country does have an easy and inexpensive option to avert, or at least lessen, this crisis: import water-intensive products. Removing trade barriers to US pork and grains would naturally reorient the economy in this direction.
Xi is often praised as an economic realist. Perhaps his excursion to Muscatine was not so random after all.