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Fast Food hamburgers from China. Really?

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Photo by China Photos/Getty Images

No, it’s not true yet. But, given that China is number one importer of all foreign commodities consumed in the United States, why not numero uno in Fast Food hamburger imports? After all, under new USDA rules, China will now be allowed to export cooked poultry products for American consumption.[1]

Right now there’s a piddling quantity of food products coming in from China. It amounts to about six billion dollars or 1.3% of all Chinese commodity imports into the United States. Nevertheless, no one can be sure if a bite of a Fast Food hamburger does not already come with a trace of Chinese processed beef.[2]

China is home to 1.3 billion people, more than four times the United States population. Its consumption of beef is 84 pounds per capita, or about half the 165 pounds of beef per person consumed in the United States. So, there’s a huge potential demand for beef in China.

Unfortunately, the United States is essentially blocked from exporting beef to China because U.S. and Chinese officials are unable to reach an agreement on trade regulations. According to the U.S. International Trade Commission, in order for the U.S. to export beef to China, beef products must meet 22 requirements set by the Chinese government. However, trade regulations, such as these, have often been used as a protective tariff.

The Chinese government has already instituted policy initiatives designed to encourage investment in new, large scale, technologically efficient beef processing systems.[3] In addition, the government may be planning strategies that allow interchangeable shifts of low cost, skilled labor and technologies from large scale poultry and pork plants[4] to new beef production start-ups.[5]

China reportedly employs 300 million farmers. The country employs intensive agricultural practices to produce massive amounts of food. In comparison, the U.S. employs 560 thousand agriculture workers out of a total working labor force of about 67 million. Another six million workers are unemployed. The enormity of China’s farm labor force vs. the United States needs little elaboration. Except that, China’s GDP has now reached almost nine trillion U.S. dollars and the economy is growing at 7.7% per year.

World trade in beef is big business. Exports amount to roughly 10 million tons and increasing rapidly to meet demand. Brazil is the top world exporter of beef and veal, India is second, Australia third and the U.S. fourth. Russia is the number one importer of beef, Japan 2nd, Hong Kong 3rd and China 4th.[6]

The United States holds the distinction of being the largest fed-cattle producing industry in the world and the largest producer of beef. The Industry’s Asian export business is hindered by high import tariffs, quotas and non-tariff trade barriers. Despite that, however, reciprocal trade agreements[7] will probably open the door for Chinese processed beef imports into the United States … the stuff Fast Food hamburgers are made of.

Another reason Americans may find more Fast Food hamburgers made in China is cost- push inflation. The substantial rise in minimum wages will likely trigger higher hamburger costs at Fast Food retail stores. The usual entrepreneurial push-back to higher labor costs is to cut material costs; i.e., use cheap processed meat made in China. Of course, other options are: Raise hamburger prices, reduce labor inputs, or cut profit margins and retain domestic suppliers.

A study published by the American Economic Review entitled, The China Syndrome, points out that China dominates all low-income country exports to the U.S. Its growth driven by transitioning to a market-oriented economy, access to foreign technologies, capital goods equipment, and multinationals being permitted to operate in China.

China’s comparative advantage versus the United States is unquestioned. However, the study concludes that low-wage countries like China are a likely source of disruption to high-wage labor markets; i.e., America’s sustained unemployment.

Thanks for reading

[1] China will be allowed to process poultry from the U.S., Canada and Chile into cooked products for export

[2] NAICS defines product classification 311 (food & kindred products) as products transformed from livestock & agricultural products for intermediate and final consumption.

[3] Overview of China Poultry Industries, American Soybean Assn.

[4] China is number one in the world for the production and consumption of poultry and pork

[5] China is the 2nd largest importer of cattle (140 thousand head per year) 2014e

[6] Foreign Agricultural Svc./USDA Nov. 2013

[7] China joined the World Trade Organization (WTO) in 2001 giving it most-favored nation status

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