Global

China Cares a Whole Lot About Pigs in Iowa

“Like it or not, Iowans’ fates are inextricably linked with those of Chinese buyers.”

By Mara Hvistendahl
Several-week-old pigs stand in a pen inside a barn at Paustian Enterprises in Walcott, Iowa, on November 19, 2014.  (Daniel Acker / Reuters)

On the bank of the Des Moines River in downtown Des Moines sits the World Food Prize Hall of Laureates. The brainchild of Norman Borlaug, the father of the Green Revolution, the $250,000 annual World Food Prize recognizes those who have made outstanding contributions to global food security. For the most part, the building’s walls are decorated with portraits of agricultural researchers who helped to end world hunger—people like Mexican biochemist Evangelina Villegas Moreno and Indian geneticist Surinder Vasal, who together developed high-protein maize. But there is one notable exception. In the hall’s ballroom hangs a bronze plaque commemorating a 2012 visit by Xi Jinping, the president of China. Xi’s big contribution: His visit to Iowa ushered in the signing of a U.S.-China pledge to cooperate in agricultural research and business. To kick off the business end of the deal, the Chinese side agreed to buy $4.3-billion worth of U.S. soybeans—more than the entire U.S. production for that year.

As the largest exporter of pork and corn in the United States and the number two exporter of soybeans, Iowa’s economy is increasingly propped up by China. Thanks to rising meat consumption and a dearth of arable land, China has a growing appetite for American agricultural products. Fully one in four rows of Iowa soybeans end up in China, meaning that Iowa’s farmers are, essentially, being kept afloat by China’s middle class.

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Given Iowa’s dependence on global trade, its economy offers a test case for understanding the hypothetical impacts of a trade war like the one President Donald Trump seems to want. In early March, Trump announced tariffs on aluminum and steel, with China intended as a prime target. Then on March 22, following an investigation into Chinese trade practices and intellectual property theft, Trump proposed levying tariffs on more than $50-billion-worth of Chinese goods. Yesterday, China began levying a 25 percent tariff on eight U.S. products, including pork, along with lesser tariffs on 120 other goods, in retaliation for the duties on aluminum and steel. Retaliatory tariffs for Trump’s intellectual property theft actions could follow, Xinhua hinted. China has “yet to unsheathe its sword” in that area, the news agency reported. The Trump administration’s list of tariffed products is due on April 6.

To understand the broader logic behind Trump’s belligerent stance on trade with China, it’s important to know that, in most sectors, the United States imports far more from China than it exports. “Putting America First,” Trump believes, means imposing tariffs to disrupt that trade deficit. As Trump tweeted on March 2, in a thinly veiled reference to China, “[W]hen we are down $100 billion with a certain country and they get cute, don’t trade anymore—we win big. It’s easy!” (The actual annual trade deficit with China in 2017 was $375 billion.)

But in a few select sectors, America has a trade surplus with China. Two categories routinely top the list: aircrafts, and soybeans, grains, and seeds. Other agricultural products like pork are crucial exports as well. Because Iowa’s hog operations are located near the cornfields that are used for feed, it is actually cheaper to produce pork there than in many parts of China. The country also buys a host of products that are not in great demand elsewhere, like pork intestines. A proposed 25 percent tariff on U.S. pork would mean a loss for farmers of up to $7 per hog, according to agricultural economist Chris Hurt.

Beijing has dangled the possibility of a tariff on soybeans as well. In 2016, the Peterson Institute for International Economics modeled the possible impacts of Chinese restrictions on soybeans. Some American counties could suffer job losses as high as 40 percent, the Institute found.

Chinese leaders are fully aware of Trump’s dependence on the heartland for political support. In a video recently posted on the website of the state-owned newspaper Global Times, the paper’s editor boasted about the country’s capacity to hit Trump where it hurts by taxing U.S. soybeans. “You cut flesh from me,” he said, “and I’ll make sure to knock out your front tooth.”

Iowa is, in fact, critical to the U.S.-China relationship. In 1985, Xi, then the deputy party secretary for a county in Hebei province near Beijing, joined a Chinese agricultural delegation to the state. He stayed with a couple in Muscatine, a farming community of 20,000 people, sleeping in their son’s bedroom, whose walls were covered in football-themed wallpaper. While there, he befriended future Governor Terry Branstad. On his 2012 visit, Xi returned to rural Iowa as China’s vice president. At a 400-acre farm outside Des Moines, he braved the February cold to pause for a photo op atop a John Deere tractor—another Iowa export—as Branstad looked on approvingly. (A full-scale replica of the farm Xi visited is now under construction in Hebei.) In 2016, when Trump announced that he was appointing Branstad ambassador to China, he joked about the governor’s longstanding ties with the country. During the campaign, Trump recalled, “He always would say, ‘Mr. Trump, Donald, don’t say anything bad about China when you’re in Iowa.’”

Then-Chinese Vice President Xi Jinping climbs out of the cab of a John Deere tractor with Rick Kimberley, while touring the Kimberley family farm in Maxwell, Iowa, on February 16, 2012. (Charlie Neibergall / Reuters)

Not all farmers would agree that China is beyond criticism. Over the past two years, I made several trips to Iowa to talk to farmers about their relationship to China. Profits from export-driven agriculture have largely gone to agribusiness companies like Cargill, and resentment among farmers is running high. The U.S. Department of Agriculture recently predicted that in 2018, U.S. farm incomes will sink to a 12-year low. The economic unrest generated by such plummeting fortunes helped fuel support for both Trump and anti-China sentiment. (I met some enterprising farmers who were studying Chinese. Others had trouble discussing the country without resorting to racist epithets.)

And yet, the trade restrictions proposed by the president stand to hurt the grain belt further. In 2013, the Midwest got a glimpse of what could happen. That year, China rejected over one million tons of U.S. corn at port after discovering shipments containing an unapproved line of genetically modified seed. Estimated losses totaled $3 billion. Distraught farmers joined class-action suits against Syngenta, the company that sold them the controversial seed line, but the suits took years to settle. In the meantime, many farmers suffered.
This is not to say that China’s theft of intellectual property and aggressive industrial policies that motivated $50-billion worth of proposed tariffs from the Trump administration don’t matter to the U.S. agricultural sector. They do. Agricultural technology is targeted in Beijing’s “Made in China 2025” plan, which aims to make China a world leader in critical sectors. Even as China has restricted the operations of U.S. agribusiness companies, in 2013 the Chinese meat processor Shuanghui International Holdings successfully acquired the Virginia-based pork conglomerate Smithfield Foods, in what was then the largest takeover ever of a U.S. company by a Chinese counterpart.
With assistance from agricultural companies, federal prosecutors have even brought several convictions for agricultural espionage cases involving China, in some instances relying on evidence collected using Foreign Intelligence Surveillance Act warrants, which are intended to be reserved for national security threats. The FBI distributes pamphlets throughout the Midwest warning agricultural companies of threats from foreign rivals. The emphasis is firmly on China.
But as the U.S. Trade Representative’s office prepares to finalize the list of tariffs, it’s worth remembering that there are a number of proposed solutions to Chinese technology transfer that do not so directly affect the livelihoods of millions of middle-class Americans. The Trump administration has pursued one of these, by using the Committee on Foreign Investment in the United States to reject bids by Chinese companies in strategic areas. Other untried solutions include blocking offending companies from access to U.S. banking companies.

Such restrictions need to be carefully considered. But the heartland, at least, would be better served by such solutions. Like it or not, Iowans’ fates are inextricably linked with those of Chinese buyers.

Mara Hvistendahl is a national fellow at New America, where she is writing a book on industrial espionage, China, and the FBI.