China has been turning back cargoes containing a specific variety of U.S. biotech corn, that that is yet unapproved for import into China. This squabble is not unusual in the world of agricultural trade, but it is important because China is our largest foreign market for agricultural products. In fact, there are multiple examples of international trade disputes involving agricultural products. Many of these have involved friendly trading partners, such as Canada, Mexico and the European Union. For instance, Canada has requested World Trade Organization (WTO) permission to impose retaliatory import tariffs on a number of food products (such as wine and pasta) resulting from a dispute over U.S. country of origin labeling regulations on meat products that are deemed to harm Canadian meat exports.
At various ports of entry, China has turned away about 600,000 metric tons (mmt) of corn imports from the United States in the past few months. These shipments contained a biotech (i.e., genetically modified) corn variety that has not been approved for import by the Chinese authority, the Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). The amount of rejected corn is significant as it represents about 20 percent of China’s corn imports from the U.S. in the past 2012/13 marketing year. China is the third largest market for U.S. corn exports. In addition to the rejected cargoes, expected corn shipments from the U.S. to China have been cancelled. For fiscal year 2013/2014 China was expected to import 7 mmt of corn even though it is the world’s second largest corn producer, behind the United States. Since the news of the rejected cargoes surfaced, U.S. Department of Agriculture analysts have lowered projections of China’s annual imports from 7 to 5 mmt. World corn prices have declined as a result.
The specific biotech corn variety at the center of this issue is Syngenta’s MR162, an insect resistant variety, approved for cultivation in the U.S. in 2010. MR162 has also been approved for import into numerous countries (including Mexico, Canada, S. Korea, Japan, and Europe) but not yet in China. MR162 was likely in earlier U.S. corn shipments to China, but only recently has China decided to step up testing of inbound cargoes.
This trade dispute has the close attention of participants in global commodity markets, because China has switched from a major corn exporter to a significant importer. In fact, China imports more biotech corn and soybeans than any other country. This marketing year China is expected to import 72 mmt of soybeans and 9 mmt of corn and DDGs, a corn byproduct. Corn imports are expected to grow in the coming years in order to meet emergent demand for meat in China, associated with rising incomes and urbanization. The vast majority of China’s corn and soybean imports are biotech varieties, even though biotech corn and soybeans are not commercially grown in China. China imports corn and soybeans primarily from the United States, Brazil and Argentina.
China has approved five-biotech crops for importation – canola, cotton, corn, soybeans, and sugar beets. Approximately 15 different corn biotech varieties have been approved by AQSIQ, including “events” developed by Monsanto, Syngenta, Bayer, and Du Pont. China also has the world’s largest ongoing biotech research program. In 2008 China’s central government allocated $3.8 billion for research on biotech crops (rice, wheat, corn, and cotton) and animals (swine, cattle, and sheep). Researchers are developing biotech crop strains that are herbicide, insect, disease, and stress resistant.
This current dispute is not having a significant effect on U.S.-China government relations because the negotiations for approval of the biotech corn are between Syngenta and China’s AQSIQ. Syngenta is a Swiss company. And the firms whose corn was turned away are multinational commodity merchants who may or may not be based in the United States.
Why is import approval for MR162 being held up? Well, there are a number of possible reasons. First, like many other countries, China might be using its biotechnology regulations as a trade barrier to support domestic grain prices. Second, China may be trying to diversify away from the United States as the main source of its corn imports. Total U.S. corn exports have fallen due to diversion of corn to ethanol production in the United States. Third, China may be trying to manipulate the world price of corn. Fourth, this could be an anti-GMO move. It is well known that military leaders in China play a role in opposition to foreign biotech crop varieties, as they fear that Western nations could use genetically modify organisms as a strategy to undermine China’s food security.
Whatever the reason, we know that going forward China will require more and more corn imports from the U.S. and elsewhere. So China will undoubtedly approve MR162, indeed long before Canada and the U.S. come to an agreement on country of origin labeling of food products.
Colin A. Carter, Professor and Director Giannini Foundation of Agricultural Economics, University of California, Davis
