snapshots

China: Swine Fever Outbreak Could Alter Trade Dispute With U.S.

3 MINS READSep 6, 2018 | 21:37 GMT

What Happened

Since the first case of African swine fever was reported in China in early August, more than 10 additional outbreaks have been reported. The disease is affecting six provinces, stretching more than 3,000 kilometers (1,864 miles) from Heilongjiang in the north to Zhejiang in the south. Now, the U.N. Food and Agriculture Organization has convened a three-day meeting of experts and representatives from countries in the region. They plan to develop a regional response to best prevent the spread of the viral hemorrhagic fever, which is not harmful to humans, beyond China's borders. As of Sept. 5, nearly 40,000 pigs had been culled in an effort to contain the disease. Restrictions have also been placed on the movement of the animals, and pork production and live hog markets have been shut down in the affected provinces. 

Why It Matters

Since the beginning of August, pork prices have risen by about 8 percent in parts of China, and those increases could exacerbate the economic fallout from the trade dispute between the United States and China. Pork is one of the major agricultural products targeted in the disagreement, so a major infection of China's domestic supply could lead to shortages, further disrupting pork markets. These developments could weaken China's ability to continue to implement tariffs. The increase in prices has already led to unease in the bond market. Should those prices remain high, Beijing could be forced to use additional economic measures to suppress inflation. Pork prices are a significant contributor to the country's consumer price index, an important economic indicator. 

Background

China is both the largest consumer and largest producer of pork in the world. Its output is more than double that of the European Union, the second biggest producer. China's pork industry is in the process of consolidating and modernizing, and this outbreak is occurring in provinces with moderate to high pig-farming concentrations. As part of its trade disputes, Beijing has placed retaliatory tariffs on U.S. pork producers, who were the world's second largest exporter in 2017. When those tariffs are combined with previous duties, the tariff total on U.S. pork rises to over 70 percent.

What to Watch For Next

The continued spread of African swine fever to new areas in China can be expected. The severity of the outbreak could escalate substantially if additional cases are reported in the large pork-producing provinces of Sichuan, Hunan and Henan. Additional precautionary measures could also hurt Chinese domestic production and lead Beijing to ease many of the tariffs and countertariffs placed on U.S. pork products. However, tariffs would most likely be relaxed on non-U.S. sources of pork first.

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