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 Richmans' Trade and Taxes Blog

Where's the Beef?
Howard Richman, 3/25/2011

The Chinese government has been growing its trade surplus with the United States during the Obama administration, as shown by the blue line being above the red line in the graph below:

It uses a wide variety of techniques to keep out U.S. products. For example, a March 2011 report from the United States International Trade Commission (China's International Trade: Competitive Conditions and Effects Upon U.S. Exports) reports that the Chinese government charges a 13-17% Value-Added Tax on food produced by U.S. farmers, but little to no tax on food produced by Chinese farmers. The following summary appears in Table 4.3 of the report:

Policy: Exemption from the value-added tax (VAT) for farmers

Policy description: For domestic production, the policy removes a tax of 13 percent on primary agriculture products and 17 percent on processed food.

Policy effects: Farmers benefit from lower taxes and higher demand for their goods. Purchasers benefit through lower prices.

Impact on U.S. exports: Imports of agricultural goods are still charged the VAT, resulting in a higher tax burden on imports than on similar goods produced in China.

And the Chinese government doesn't just rely upon hidden tariffs to keep out U.S. products. It also uses the usual kind of tariffs including tariffs of up to 105.4% on some chicken products and a 35% tariff on U.S. raisins.

But the Chinese don't need tariffs, hidden or otherwise, to keep out U.S. products. They simply keep out U.S. products through regulatory fiat. According to Chinese government statistics, Chinese meat consumption has been growing at a 7.7% per year pace since 1998. But according to the 2010 Report to Congress on China's WTO Compliance published by the United States Trade Office, Chinese purchases of U.S. meat have been stagnant:

In 2010, the principal targets of worrisome practices by China’s regulatory authorities were poultry, pork and beef products, where anticipated growth in U.S. exports of these products was again not realized. In particular, China continued to block the importation of U.S. beef and beef products, well over three years after these products had been declared safe to trade under international scientific guidelines. (p. 8; pdf p. 16)

The United States could put an end to all of the subterfuges used by the Chinese to keep out American products. All we would need to do is impose a WTO-legal scaled tariff, whose duty rate upon U.S. imports from China would be scaled in order to take in half our bilateral trade deficit as government revenue.

Donald Trump, one of President Obama's possible Republican opponents, has been making Obama's wimpy trade policy an issue. When he campaigns in Iowa he can ask, "Where's the beef?"