Old Macdonald's Big Asian Friend
When the U.S. recently unveiled plans to slap punitive tariffs on some $2 billion worth of Chinese exports to the U.S., Beijing responded by threatening similar action against U.S. products--notably American agricultural exports. Despite China's massive food needs, however, economist Joseph P. Quinlan of Dean Witter Reynolds Inc. thinks that this is one threat that shouldn't give U.S. farmers too many sleepless nights.
For one thing, he notes that roughly 75% of U.S. farm exports to China consists of wheat, grains, cotton, soybean oil, and other bulk items. Since these are internationally traded commodities and Chinese needs will still add to global demand, any decline in U.S. exports to China should be largely offset by rising shipments to other nations.
More important, says Quinlan, China is hardly a large or critical market for American agricultural products. In 1995, it imported just $2.7 billion worth of American farm products, or 4% of total U.S. agricultural exports of $66 billion.
Indeed, it's not China but Japan that constitutes America's hottest and largest agricultural market, accounting for roughly a quarter of total U.S. exports last year. By the same token, the U.S. today is Japan's top food supplier, providing nearly 30% of the country's imports of foodstuffs--including a rapidly growing volume of high-value consumer-oriented food products.
Last year, for example, Japanese purchases of U.S. fresh fruit and pet foods rose by 16% and 26%, respectively. And Japan's appetite for American snack foods, vegetables, meat, and dairy products grew by 30% to 35%.
"The Chinese mainland," says Quinlan, "is a market of the future for U.S. farmers, but Japan is a market for today, and a darn good one at that."