Minnesota Exports to China are Booming, but Farmers and Others Fret

By Doug Barry

Su Ye is a numbers person. As chief economist for the Minnesota Department of Agriculture, she keeps track of trends in areas like agriculture exports to the world and their effects on economic output and employment. But behind the data is deeply personal angst involving the country of her birth, the country of her residency, and their increasingly problematic future.

The story has been much better in the recent past. Of all 50 states that export goods to China, Minnesota is number seven. 21,500 jobs are supported by these sales. Minnesota is number four out of US states for agricultural exports to China. According to Ye, agricultural exports to China alone have grown 15-fold or 1,430 percent over the past two decades, largely because the commodities Minnesota produces—soybeans, hogs, corn, feed, dairy, etc.—continue to be the most popular Chinese imports. Agriculture products account for a third of the state’s exports to the world, with the remainder comprised of medical equipment, machinery, and other goods.

Minnesota Total Exports and Agriculture Exports to the World ($ Billion)

Source: US Department of Commerce, US Department of Agriculture, Minnesota Department of Agriculture

Prior to the pandemic, Minnesota farmers and other exporters regularly traveled to China on state-led trade missions of up to 150 members. After arrival, they split into smaller groups by industry with agriculture, medical, education, environmental technologies, and others.

“I have been to China with every Minnesota governor over the past 15 years,” said Ye. She’d also accompany and advise state companies exhibiting at major trade shows, a proven way to introduce products and find buyers. “It’s hard to get interest and exposure without these trips, because face time is so important with Chinese buyers and consumers.”

Even without face time, commodity sales to China continue to increase, but more products are not entering the market as timely, and the state needs to reach out to second- and third-tier cities, which have millions of people but are not the size of Beijing or Shanghai.

Fields of green backs

In addition to constraints on travel that may not be lifted soon, as well as uncertainties over what happens now that the Phase One Agreement purchase commitments have expired, Ye worries that larger geopolitical disagreements between the world’s largest economies will boil over into Minnesota’s lush farmland.

One warning sign is a noticeable dip in enthusiasm. She belongs to the Minnesota-China Business Council. As a board member for many years, she used to see more than 100 people at monthly meetings. “The Council stopped collecting dues because we don’t have enough draw. We used to have events, socials, sharing of success stories, but we don’t do that on a regular basis anymore due to a lack of participation.”

That said, Minnesota’s agriculture-related export industries appreciate the future growth potential of the China market and have created an integrated network including growers, processors, and exporters to take full advantage. The state government, commodity groups, and business associations support export growth and enhancing competitiveness.

“When I go back to China, I hope to convey the message to my Chinese business counterparts and government officials that in spite of it all, we need to cooperate to resolve the differences.”

“The business community is very concerned,” she said. “People are looking forward to improvements in the bilateral relationship, but there is a lot of friction between the two governments. It is an uncertain time for Minnesota businesses. They have hope for the China market, but now the expansion efforts have slowed. They have uncertain decisions to make about China.”

Phase One phases out

What is certain is that businesses are pulling all available levers to keep the shiploads heading west. Total US goods exports to China were up 18 percent in 2020 and nearly 11 percent through November of 2021. The growth began after the Phase One Trade Agreement went into effect. With the agreement expired and nothing yet announced to extend or replace it, farmers are nervous.

“Everything we can do is being done, including telling our story in Congress,” she said, noting that national ag groups such as the American Soybean Association, US Grains Council, US Meat Export Federation, and other commodity groups are making the case to Congress and the administration for removing tariffs or extending and expanding the tariff exclusion process, which allows the tariff rate of the excluded product to remain at the lower percentage that existed before the trade war began.

The US-China dispute and its effect on her state are deeply personal for Ye. “So much of what’s happening is out of our control,” she says.

“Chinese people used to admire the US, the land of opportunity. It all stopped. People don’t ask me to help them come to the US anymore. America was a dream to so many young Chinese, and they wished to have what we had. None of that anymore—even with my own family and friends in China. We don’t have the same closeness and camaraderie as before, because so much anti-American sentiment is floating around. It is very difficult for me personally.”

She says there’s so much misperception, misunderstanding, and miscommunication between Americans and Chinese, in addition to bilateral tensions and different interests. That’s a combustible combination with countries and economies of this size. “When I go back to China, I hope to convey the message to my Chinese business counterparts and government officials that in spite of it all, we need to cooperate to resolve the differences.”

She regrets not having that opportunity now.