The trade war between Washington and Beijing is choking off China’s supply of crops such as soyabeans and cotton. India believes it has the answer.
Indian officials and exporters are pushing to boost sales of staples such as rice, sugar and milk to China, exploiting an opportunity created after Beijing raised tariffs on many US foodstuffs. Officials have signed agreements to sell fish oil and rapeseed meal to China, lobbied to remove import barriers to soyabean meal and discussed ways to increase sales of fruit and vegetables.
Selling more produce to China would provide a boost for Narendra Modi, the prime minister, as he seeks to appease farmers angry about low prices and high debt levels ahead of national elections in 2019. Tens of thousands marched on the capital New Delhi in November, capping off a year of farmers’ discontent.
“You have an agricultural sector in India today which really needs a shot in the arm. That shot in the arm needs to come from greater market access,” said Amitendu Palit, an economist at the National University of Singapore and former Indian government official who worked on trade.
China is one of the world’s largest consumers of commodities, while India is a leading producer of everything from cotton to milk. Beijing is looking for new suppliers after the trade dispute exposed its dependence on US food, and India argues it is ideally placed to help feed China — trimming its trade deficit with Beijing in the process.
Some question whether the south Asian country will be able to take advantage act in time, however, particularly after the US and China came to a fragile truce at the G20 summit in Argentina. Economists say a sector largely made up of small and disorganised farms needs deeper reform to compete with big exporters such as Brazil. An editorial in Chinese state-run Global Times newspaper suggested India’s ambitions were “pie in the sky”.
“We have a long way to go,” admitted Bipul Chatterjee, executive director at CUTS Centre for International Trade, Economics and Environment, a think-tank. “We’re not that competitive.”
But Indian officials have seized the opportunity to kick-start the process. In October 24 mills were cleared to begin exporting rice to China, and in November officials agreed terms to start selling fish meal and oil. New Delhi also lifted restrictions on exporting sugar, ahead of what is expected to be a bumper harvest this year, and have booked sales to China.
A Chinese delegation recently visited India to inspect sugar mills for exports, said Prakash Naiknavare, managing director of the National Federation of Co-operative Sugar Factories, the culmination of a months-long courtship of Chinese buyers. “We’re putting a lot of hope in this,” he said.
Nowhere is there more potential than in the trade for soyabeans. China buys more than any other country and secured most of its soyabeans from the US before a 25 per cent tariff went into effect in July. India is one of the world’s largest producers, with an expected crop of 11m tonnes for 2019.
This year China lifted tariffs on soyabean meal imports from India and other Asian nations, though trade is still hampered by separate sanitary restrictions.
A delegation was due to visit India in December to finalise an agreement, said Davish Jain, chairman of the Soybean Processors Association and president of soyabean company Prestige Group. One of his plants had been approved for exports, he added.
Prices for soyabeans at India’s National Commodity and Derivatives Exchange have risen about 10 per cent in the past two months in anticipation.
“The Chinese dragon’s appetite is huge,” Mr Jain said. “They can swallow all of our exportable surplus easily.”
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