COVID-19 could alter agricultural trade relationships

While progress was being made on the U.S.-China Phase One agricultural deal with changes to regulations on non-tariff barriers, COVID-19 has raised questions about diversifying suppliers for world-wide trade.

“We saw lower buying activity from China in January and February of 2020, just as China was starting to offer tariff waivers to facilitate import purchases from the U.S.” said Virginia Tech expert Jason Grant, associate professor of agricultural and applied economics at Virginia Tech.

“COVID-19, however, has likely impacted first quarter imports as agricultural trade numbers are running significantly behind 2017 Phase One benchmark levels, which means that China would have to purchase a lot of product later this year to fulfill the deal,” said Grant. “Backhauling is another supply chain issue, if ships are delayed in China and aren’t coming to U.S. ports, or vice versa, then there could be a shortage of ships, which is not good news for U.S. producers trying to sell product to China.”

The delay in products getting to their final markets could lead countries and producers to alter their international supply chains and practices once the pandemic ceases.

“It may change the view of globalization and interdependency for food,” said Charlotte Emlinger, an agricultural and applied economics expert at Virginia Tech.

“We can imagine that countries will change their risk analysis about being dependent on other countries for food supply. Some countries may implement higher protective policies once the pandemic is over to promote food independency because this pandemic shows how fragile world interdependency is, but the behavior change of states and firms will be more drastic in manufacturing,” said Emlinger.

Mary Marchant, an expert on trade with China, also notes that “China already has a five-year plan that includes diversifying its suppliers.” However, she also acknowledges that the U.S.-China trade relationship is vital for agriculture.

“China has about 20 percent of the world’s population but only 10 percent of the world’s arable land, so they really need agricultural imports to feed their people,” said Marchant.

Information from Virginia Tech Media Relations