The Crush - August 2019 - 3


Ongoing Trade Turmoil Between US and China


By John Aguirre
Each new round of escalating tariffs between the United States
and China delivers a wave of news reporters calling the CAWG
office asking how California winegrape growers are affected.
Recently, President Trump announced his intent to ratchet up the
pressure on China by threatening an additional round of tariffs
on $300 billion of Chinese goods. In response, China threatened
to shut the door on all U.S. farm goods. So, reporters want to
know what all of this means for growers.
Obviously, losing access to the China market for California wine
exports doesn't help pricing for winegrapes, but it's hard to draw
a straight line between lost market share in China and depressed
grape prices. However, the consequences of this trade war are
much clearer and readily understood by farmers across the U.S.
In 2017, China bought $19.5 billion in U.S. farm goods, but by
2018, U.S. farm exports to China dropped to $9.1 billion. Farm
income has taken a hit too. In 2013, farm income hit a high of
$123.4 billion, but for 2018, USDA reported farm income dropped
to $63 billion. While several factors contributed to that drop, lost
export markets don't help. In fact, the Trump administration
acknowledges our trade fight with China is exacting a heavy toll
on U.S. agriculture.
According to the National Association of State Departments of
Agriculture, U.S. farm exports to China represented 5 percent of
U.S. cash receipts in 2017, but for some sectors the China market
is of far greater significance. Exports to China deliver 29 percent
and 51 percent of cash receipts for U.S. soybean and sorghum
Grant Kimberley, of the Iowa Soybean Association, told an AgriPulse reporter that for the current marketing year, "...the U.S.
has shipped about 9.6 million tons of soybeans to China, less
than half of the 20 million tons that U.S. officials say China has
pledged to buy and just a pale shadow of the roughly 36 million
tons that China had purchased by this time of the year two years
ago." The situation is similarly dire for U.S. pork producers. The
National Pork Producers Council estimates a loss of $1 billion for
the pork industry on an annualized basis.
To make up for lost sales to China in 2018, the Trump
administration offered subsidies to affected U.S. farmers. From
October 2018 to May 2019, the U.S. Department of Agriculture
(USDA) delivered $8.5 billion in subsidy checks to 577,713

farmers nationwide. Of that
amount, California farmers
received $73.6 million, according
to the Fresno Bee. Recently,
USDA announced another
round of income subsidies for
farmers totaling $14.5 billion.
Unfortunately, these subsidies
can't shield the ag economy from
the long-term, lasting effects of
this trade war. Disruptions to
trade relations and supply chains will take time to recover.
Despite the heavy toll the U.S.-China trade dispute is taking on
the U.S. farm economy, many surveys suggest most U.S. farmers
support the Trump administration's approach and believe the
dispute will be resolved in a way that ultimately benefits U.S.
farmers. I certainly hope this is true.
Looking past the ongoing dispute with China, it's important to
remember the fundamentals of trade and tariffs. More trade -
imports and exports - is better than less trade. Hiding behind
import tariffs as a long-term policy strategy is bad for our economy.
According to the U.S. Trade Representative (USTR), which
operates out of the White House, the U.S. is the largest trading
nation in the world; our combined exports and imports of goods
and services totaled $5.3 trillion during 2017, up 6.5 percent ($321
billion) from 2016, and up 31 percent from 2007. USTR's position
on trade is: "Trade keeps our economy open, dynamic, and
competitive, and helps ensure that America continues to be the
best place in the world to do business."
A 2019 study, prepared for the Business Roundtable by the
research firm Trade Partnership Worldwide, underscores the truth
of USTR's claim. According to that report, trade supports nearly
39 million in U.S. jobs, meaning nearly one in every five U.S. jobs
is linked to exports of goods and services. That's nearly double
the number of jobs dependent on trade as in 1992, just two years
before the U.S. adopted NAFTA in 1994 and subsequent trade
liberalization agreements.
When it comes to trade, the most important thing we can do
is to maintain our commitment to free trade policies, because
free trade means increased national wealth, and a prosperous
and growing economy is essential to the economic health of
California's winegrowing industry.
AUGUST 2019 / 3


The Crush - August 2019

Table of Contents for the Digital Edition of The Crush - August 2019

The Crush - August 2019 - 1
The Crush - August 2019 - 2
The Crush - August 2019 - 3
The Crush - August 2019 - 4
The Crush - August 2019 - 5
The Crush - August 2019 - 6
The Crush - August 2019 - 7
The Crush - August 2019 - 8
The Crush - August 2019 - 9