From the historical perspective the U.S. agriculture industry generally understands that it often bears the brunt of international trade disputes. The current trade dispute imposed by the U.S. with multiple trading partners is no exception. However with farm income down 52%, the longevity of continued support from farm constituencies of this particular trade dispute is in question.
Among the multiple countries involved in the current trade dispute the major disruption in agriculture trade between the U.S. and China is the most financially damaging. For instance, USDA’s Federal Grain Inspection Service recently revealed that through the first seven weeks of the 2018/19 marketing year (September 1 – October 19), 7.4 million bushels of new-crop U.S. soybeans have been shipped to China, down 97 percent from prior-year levels. Through the first seven weeks of the previous marketing year, the U.S. shipped 239 million bushels of soybeans to China, and during that same period in the 2016/17 marketing year the U.S. shipped 211 million bushels.
But what’s driving the trade dispute between the U.S. and China, the two largest economies in the world has largely been ignored by the agriculture industry. In announcing the U.S. trade policy that imposes tariffs on Chinese products imported into the U.S., the Trump Administration explained the actions were taken to confront China about its unfair trade practices and theft of American intellectual property.
While this may be true China appears undeterred. China has opened its commodity reserves and Chinese commodity buyers are traversing the world to shore up lost U.S. commodity imports from other willing nations. Moreover, just ten days ago Chinese President Xi appeared before top Communist officials of the Politburo urging China to accelerate development of new-generation artificial intelligence.
The long-term implications to the U.S. agriculture industry are lost commodity export markets. Consider, after the December 2003 diagnosis of bovine spongiform encephalopathy (BSE or “mad cow” disease) in an adult Holstein cow from Washington State, China prohibited the importation of U.S. beef until June 2017 – 14 years!
Compounding China’s market patience is their (July 2017) State Council plan dictating the goal for China to become “the world’s primary AI innovation center” by 2030. And, China likely already has significant advantages in the race to AI dominance due to its massive size, enormous amounts of available data needed for AI deep learning systems, internet commerce, and lack of privacy protections.
In February of 2017 The National Bureau of Asian Research, (NBAR) an American nonprofit research institution updated their report on the Theft of American Intellectual Property (IP) (aka the IP Commission Report). In their report MBAR said, “Congress and the Obama administration took the lead from our report and implemented several of our top recommendations. Congress gave the president the power to sanction foreign entities that engage in cyberespionage of IP and gave U.S. entities private right of action in federal courts against thieves of their trade secrets.” But, “despite the success of the report and resulting legislation, there is still much work that needs to be done.” The MBAR “estimate(d) that the annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion.”
Early into his second year as President, Donald Trump began a U.S. trade policy that imposes tariffs on products imported into the U.S. Tariffs were imposed on solar panels and washing machines and by June 2018 The Trump Administration’s tariffs extended to imports of steel (25%) and aluminum (10%). On July 6, the Trump Administration imposed a 25% tariff on 800 categories of goods from China totaling $50 billion. By mid-September the Trump Administration imposed new (10%) tariffs on $200 billion worth of Chinese goods. Many countries whose products were subject to U.S. tariffs responded with retaliatory trade tariffs on U.S. goods, mainly agriculture commodities and products.
Artificial Intelligence & the Rush to Dominance
Since the late 1950’s artificial intelligence has maintained multiple disciplines and definitions. Today, the English-Oxford Dictionary defines AI as, “The theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.”
Meriam-Webster defines AI as, “1 : a branch of computer science dealing with the simulation of intelligent behavior in computers, and 2 : the capability of a machine to imitate intelligent human behavior.”
Developments in AI can be industry specific and profound. For instance, Amazon’s development in AI is different from Google’s development. Amazon’s focus on machine learning improves their customers experiences combining quality with speed of logistics. Google focuses on data and deep learning to improve the usefulness of technology like smartphones. Both company’s respective AI focus are crucial to its bottom line.
But there are also downsides to AI. For instance, AI will cause job losses in lesser-skilled employment. McDonald’s is already implementing digital menus and you can order and pay from your smartphone. Military applications such as manned-unmanned operations, weapons development and deployment can become effective warfare tools. The ease and increase of improved surveillance and cybersecurity threats are also concerns.
Consequences to U.S. Agriculture
The U.S.- China race for AI dominance in the world is a long-term undertaking with a questionable outcome. While the U.S. maintains an advantage in AI development, that can change quickly, and China has exhibited market patience and has an uninhibited plan to achieve AI dominance by 2030. The race toward AI dominance will undoubtedly have consequences for U.S. agriculture that will include an acceleration of reaching economic efficiencies and economies of scale in production agriculture.
For instance farmland is likely to become more consolidated and owned by investment groups. The role of a farmer may become more of a professional Farm Manager for one of these farmland investment groups. Becoming a professional Farm Manager for a farmland investment group may be more appealing considering the following:
- the rise in investment groups interested in buying productive farmland across the U.S. in the past decade,
- aging farmers (average age of farmland owners is 58) may be looking toward retirement, and
- appreciating value of farmland is a barrier to entry for younger farmers.
Compounding this are competing foreign investment interests in U.S. farmland. In 2013 the Chinese firm, Shuanghui (WH Group Limited) purchased Smithfield Foods for $4.7 billion. In 2016 China’s National Chemical Corporation purchased Syngenta for $43 billion. Both deals include ownership and significant investment in a large amount of farmland in the U.S. In fact, USDA estimates that Chinese interests own or are invested in over 240,000 acres of U.S. farmland.
According to USDA’s Farm Service Agency foreign persons held an interest in 28.3 million acres of U.S. agricultural land as of December 31, 2016. This is 2.2 percent of all privately held agricultural land and 1 percent of all land in the United States. These and other findings are based on an analysis of reports submitted in compliance with the Agricultural Foreign Investment Disclosure Act of 1978.
During the 115th Congress Republican Congressman Pete Olson (R-TX) and Democratic Congressman John Delaney (D-MD) founded the bipartisan Congressional Artificial Intelligence (AI) Caucus. “The goal of the caucus is to inform policymakers of the technological, economic and social impacts of advances in AI and to ensure that rapid innovation in AI and related fields benefits Americans as fully as possible. The AI Caucus will bring together experts from academia, government and the private sector to discuss the latest technologies and the implications and opportunities created by these new changes.” The AI Caucus met throughout the 115th Congress and members of the U.S. House and Senate offered a total of 48 resolutions focusing on some aspect(s) of AI. More AI-focused legislation is expected to be introduced during the 116th Congress.