Doud: China wants the ‘goose’ that led to prosperity
May 23, 2018
"If I make any news this morning I will not have done a good job," Gregg Doud, the Trump administration's chief agriculture negotiator said today at a Farm Foundation forum with three of his predecessors.
But a few minutes later, Doud took a harsh line in discussing China at a time that U.S. farmers are worried that President Donald Trump's proposed tariffs on steel and aluminum will lead China to reduce purchases of U.S. farm products.
Doud urged the audience to read the Office of the U.S. Trade Representative report on the Section 301 investigation into China's acts, policies and practices related to technology transfer, intellectual property and innovation.
"It's the goose that laid the golden egg and now China wants the goose," Doud said, referring to China's insistence that U.S. companies doing business there provide access to the technology behind their products.
Doud also pointed out that these practices have taken place "outside the realm of the World Trade Organization," and said "this is the issue we have in front of us."
Doud also noted that USTR has filed WTO complaints against China, charging that it has exceeded its allowed agricultural subsidies and now has large stocks of commodities that are affecting prices worldwide.
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USTR believes that since China joined the WTO in 2001, it has exceeded what it believed would be its right to agricultural subsidization by "somewhere in the neighborhood of $100 billion," he said.
The result, he noted, is that China now has 38 percent of world's residual corn supply, 52 percent of the wheat, 67 percent of the rice, 22 percent of the soybeans, and 40 percent of the cotton.
China "is not a country that necessarily believes in the dynamics of supply and demand and futures markets and price discovery," Doud said.
"We have to remind ourselves today that China is a communist command-controlled economy. When you have that level of the world's residual supply of these agricultural commodities in one country, and that country is costing not only U.S. farmers money in terms of lower world commodity prices for these commodities — it is costing every farmer in the world money. This is something that has to be addressed."
Doud said that when he became chief agriculture negotiator on March 1, China had 45 percent of the corn supply.
"I believe China has begun to realize something that we realized in the 1980s here in our farm policy," Doud said.
In 1986, the U.S. government owned 60 percent of the corn stocks, which was "an unmitigated disaster," he said, that led to Congress decoupling farm subsidies from production.
"The purpose of this discussion is to make China realize we know how this movie ends" and that "they need to take farm policy in a different direction."
Doud also noted that the United States has another WTO case against China over its administration of its tariff rate quotas and has filed a counter notification to India's notification to the WTO on domestic support charging that China subsidizes much more than it reported.
Some countries want to get back into negotiations about reducing subsidies, but China and India represent 40 percent of the world's population and the United States needs "a good understanding" of what they are doing before heading back to the negotiating table," he said.
From a U.S. perspective, Doud said, the trade discussion has always been about reducing domestic supports coupled with market access.
Other counries have urged the United States to reduce domestic supports and said they want to talk about access to their markets later, but the answer to those propposals is "no, no, no, no," Doud said.
Market access and domestic support, he said, have to go "hand in hand."
On the North American Free Trade Agreement, Doud said that "the pens are not down," but it is important to get the policy right rather than to rush it.
Renegotiating NAFTA is much harder than the original NAFTA agreement, he said, because the agreement with Canada had been done a few years earlier and the NAFTA negotiation was basically a bilateral agreement with Mexico.
He also noted that USTR wants to negotiate a free-trade agreement with Japan and that he expects there also will be a negotiation with the United Kingdom to write a free-trade agreement once the UK leaves the European Union, but "the complexity will be extraordinary."
Doud said he would not want to reopen the sanitary and phytosanitary section of the Uruguay Round agreement and that "blockchain" — the computer network technology that allows sharing of information in a much more secure way — is likely to revolutionize food safety because problems can be figured out quickly.
One of the surprises when he took the job, Doud said, is how bad relations are with the European Union, and he cited EU policy on pesticides as an example.
Doud said he likes working with Trade Representative Robert Lighthizer because Lighthizer "understands leverage."
A subject that is being discussed and leveraged, Doud said, is the generalized system of preferences that gives countries such as Indonesia, Thailand and India duty-free access to the United States.
But many of those countries are behind on sanitary and phytosanitary standards, Doud said, and the Trump administration is saying "hold on a minute. It is very important that if you are going to be a part of GSP you are going to play by the rules here in the international community, and we are going to hold you to that."