Brazilian agribusiness loses US $ 10 billion with full agreement between China and US

Against the backdrop of an end to the trade war between China and the United States, Brazilian exports to the Asian country may initially fall by $ 10 billion, according to Insper's projection. The amount is equivalent to 28% of Brazilian agribusiness sales to the Chinese.
 

The impact is calculated from what Brazil's agricultural products would lose if China were to comply with the measures announced by the US government last week. One of them states that the Chinese must increase imports of US agribusiness.

 

According to US Trade Representative Robert Lighthizer, the Chinese pledged to increase US farm imports by $ 32 billion over the next two years.

 

That increase would be on a $ 24 billion basis – which is the total amount of agricultural products exported by the Americans in 2017 before the trade war.

 

To fulfill this part of the deal, the Chinese would have to buy between $ 50 billion and $ 60 billion of US agribusiness in two years – values ​​that, even if analyzed annually, are very far from the $ 13.2 billion exported in 2018 by Americans to Asians.

 

The problem, according to Insper's analysis, is that in order to recover the $ 24 billion before the trade war and add another $ 32 billion in just two years, China would have to stop buying from other suppliers, such as Brazil. .

 

"In an optimistic scenario for Americans where they can export $ 30 billion to the Chinese, as it did at its peak, China would still have to find a way to the other $ 25 billion," said Marcos Jank. , coordinator of Insper Agro Global.

 

"Part of that will come from what we export today. So it is possible that we will return to the pre-trade war level, losing about $ 10 billion in exports of agricultural products."

 

Brazilian agribusiness sales to the Chinese grew sharply in 2018, while those of the Americans plummeted. Brazil's exports of agricultural products went from $ 26.6 billion in 2017 to $ 35.4 billion last year. Meanwhile, in the same period, US products fell from $ 24 billion to $ 13.2 billion.

 

"If China suspends taxation on US products, the first thing that will happen is the rebalancing of soybean sales (from the US to the Chinese). The soybean returns to the Americans between $ 11 billion and $ 12 billion. Now where will all the rest of the deal come from? "Jank said.

 

The remaining values ​​may come from other products of the Brazilian-dominated agricultural agenda, which have the US as a major competitor. Chicken meat and cotton are the examples highlighted by Insper.

 

In the first case, the Brazilian product has dominated the Chinese market for almost a decade, and last year Brazilian producers exported more than $ 1.1 billion in chicken, while Americans did not reach $ 100 million.

 

Already in the situation of cotton, the United States has long dominated the market of the Asian giant, but this year Brazil should break its record and touch the Americans. Brazilian exports are projected to reach US $ 711 million in 2019, compared to US $ 714 million for Americans.

 

In addition to these markets, the Chinese may review purchases of beef from American suppliers, whose share is insignificant, while that of Brazil is predominant (see the current rise in the price of the product in the Brazilian market with strong demand from the Chinese).

 

As for pork, although the US outperforms Brazil, Brazilian exports have shown significant growth, with less than US $ 14 million in 2010 to around US $ 570 million this year.

 

Jank also said that there was a crop failure in the US with the dispute, which will make it difficult to quickly replenish exports before the dispute.

 

"This would take more than two years. So once again, reaching $ 55 billion in this period seems unworkable," he said.

 

Thus, in order to be able to meet the demand forecast in a possible full agreement with the Trump government, the Chinese would have to make concessions for new products, which could also impact Brazil.

 

"The Chinese can create a preferential system for the United States, such as corn, rice and ethanol," according to Insper's coordinator.

 

Although preferential openings, such as the one drawn above, may be questioned at the World Trade Organization (WTO), Jank points out that there are ways for the Chinese to circumvent the situation and there is also the issue of dismantling the entity, with the weakening of the Appellate Body.

 

"The Chinese cannot grant another WTO country privileged treatment without making the same concession to the other member countries. The only way to do that is by using their state-owned companies to make purchases," he said.

 

"And who are we going to complain to? The non-appointment of WTO judges is exactly the world we are going to live in now, from here. It's complicated the world we are living in."