Former U.S. Senator Max Baucus of Montana, confirmed as the next U.S. Ambassador to China, could help restore U.S. beef exports to China. China banned all U.S. beef exports after a BSE outbreak in 2003, but China’s increased beef consumption could help Baucus lift the ban.
On Thursday February 7, 2014 the U.S. Senate confirmed Max Baucus as the next U.S. Ambassador to the People’s Republic of China. Baucus was confirmed by a vote of 96-0 and will replace Gary Locke as the chief diplomat in what many see as one of the most important diplomatic postings.
The choice of Baucus, a moderate Democrat from Montana and 35 year-veteran of the U.S. Senate is important for a variety of reasons. Having served as the chair of the Senate Finance Committee, Baucas has a strong background in trade policy, but little expertise in military and security issues. That could allow the Obama administration to maintain greater control in those areas.
Some have speculated that the long time Senator may bring something else to China: U.S. beef.
December of last year marked a critical anniversary for the U.S. beef industry. On December 23, 2003, officials discovered a Canadian-born Holstein cow in Washington state that had contracted Bovine Spongiform Encephalopathy (BSE). This incident resulted in dramatic repercussions for the U.S. beef industry. In addition to adding millions of dollars in operating costs, the incident and subsequent bans proved extremely costly for beef exports, by some estimates $8.829 billion USD from 2004-2008 alone. Only since 2010 have beef exports recovered to their 2003 levels.
Over ten years since the incident, five Latin American countries and China continue to ban all U.S. beef. Asian markets have gradually lifted the ban, beginning with Japan in 2005 and South Korea in 2006. Given the immense potential that markets such as China offer, the removal of this ban is a high priority for the U.S. beef industry.
China offers incredible opportunity for the U.S. beef industry. Urbanization and the rising incomes of a growing middle class have helped increase demand in China for beef. Beef is still a niche market in China only accounting for 8 percent of total meat consumption, most of which is eaten away from home, often in restaurants.
Yet, this is expected to change. Consumption in China is expected to rise by as much as 24 percent in the next decade. Since 2006, Chinese beef production has not kept pace owing to high input cost, poor rural access to credit, reduced government support and a low return compared to other agricultural activities.
With demand outpacing supply, countries such as Australia, New Zealand, Brazil, Uruguay and India have greatly increased their beef exports to the country. Such demand presents a clear opportunity for the U.S. beef industry. Some have speculated that the appointment of the former Senator from a western high beef producing state may lead to positive developments.
As a Senator representing the state of Montana, Baucus discussed the ban to Xi Jinping before he became President of the People’s Republic of China. “China’s unfounded and unscientific barriers on U.S. beef are unfairly impeding American exports…,” Baucus said at a meeting with Xi in 2010. Additionally, Baucus served as the chairman of the Congressional Executive Committee on China. During his period as chair, the committee criticized China’s human rights record and currency manipulation.
These actions could lead to a degree of caution by some Chinese governmental officials in initial dealings with the new Ambassador on certain issues. However, this seems less likely as early reports on the reception in China of the appointment indicate relative satisfaction.
Some view Baucus as a politically convenient appointment, who is not fluent in Mandarin (while the previous two U.S. ambassadors under Obama were). Others have noted that Baucus is someone with close ties to the administration, a long track record of economic and trade experience. Most importantly, Baucus is a big picture pragmatist who will be looking towards promoting economic cooperation as the U.S. economy is growing and China’s is slowing.
Still others have even stated that Baucus’ capabilities as an Ambassador will be limited to the U.S.’ political and economic capital and that both the appointment and the overall job itself mean relatively little in the larger context and workings of the Sino-American relationship.
While it is certainly too optimistic to presume that the appointment will end the ban on U.S. beef exports, it is equally too easy to discount the importance of personal relations and Baucus’ prior experience on agricultural and trade issues.
The more important factor will be the demand for beef in China and the ability for China to meet that demand with existing markets and agreements. Additionally, the larger framework and state of relations between the two countries on other issues will certainly affect the existence of the ban. In this sense, it may very well be other dominating issues, and the ability of the new Ambassador among others to deal with them, which may be decisive in the speed of removal for the ban on U.S. beef.
