China uses trading power to dictate access to seafood resources

Published on
June 3, 2014

A free trade agreement with Iceland will kick in this month, making Icelandic seafood cheaper in China. The free trade agreement (FTA) will likely see more European seafood being directed through Iceland to avail of the cheaper trade with China where consumption of all categories of North Atlantic seafood is rising. Cod is one of the species set to grow in terms of local consumption in China.

There are plenty of countries seeking to follow Iceland’s lead and sign similar pacts. China has 35 free trade agreements signed or under negotiation. It also has an FTA with Pakistan and with Association of Southeast Asian Nations (ASEAN) countries while its deal with New Zealand has been a boon to that country’s agricultural exports. Little wonder that Australia — a supplier of abalone, lobsters and other species here — is also currently negotiating a free trade pact with China.

Aside from being the world’s top exporter (USD 2.2 trillion (EUR 3.4 trillion) worth of goods shipped in 2013) China is also emerging as the planet’s leading importer: the figure for 2013, USD 1.95 trillion (EUR 1.4 trillion), represents a 93.9 percent increase on 2009. Imports of proteins, including meat and seafood, grew by more than 200 percent last year.

The scale of its needs and its trade will allow China to dictate the terms of its needs. Indeed Beijing is increasingly using its economic clout to turn trade into a diplomatic tool and will continue to do so. Mainland China’s hunger for quality food and seafood is a powerful inducement to territories that Beijing is seeking to bend to its will. For instance, newly established free trade access means 60 percent of Taiwan’s agri and fisheries exports will go to mainland China by 2020. This achieves Beijing’s wish to win over the rural Taiwanese voters who largely oppose Beijing’s claims on the island, seen by the Communist Party as a renegade province.

Likewise, with ASEAN, China skewered the benefits toward the rural masses when the China-ASEAN FTA kicked in. Benefits in the form of open markets flowed quickly to the region’s producers and exporters of agri produce and seafood — for whom China has, no surprise, become the number one export destination. While it has lately fallen out with Vietnam and the Philippines, China has used soft loans and preferential access to its markets to bend poorer states like Cambodia and Laos — and to a lesser extent, Burma — to its will. China’s role as the world’s biggest exporter in cash terms means its trade deficits with numerous countries are a good reason for Beijing to open up access to more fisheries and seafood. The trade surplus it has run up with India was a source of irritation for Delhi and forced Beijing to widen the range of goods it imports from India — meat and seafood like shrimp (both in short supply in China) are high on the list.

Likewise a need to redress its trade surplus with Morocco is giving China an opening to increase seafood imports. After some protestations from the Moroccan government it’s offered Rabat the chance to increase its export earnings by granting more access to the country’s seas, in lieu of current deals in place with the EU. The Moroccans have been courting Chinese investors and tourists by bringing over delegations of journalists and officials (and executives).

The power of the yuan will also have an impact in the longer term. China is coming to a stage where it wants to spend more of its own money. For decades China parked its huge export earnings (foreign currency reserves) into safe, low yield investment vehicles like U.S. Treasury Bills. But now, as Beijing pushes for the convertibility of the yuan, it sees far better yields elsewhere and is handing cash to state-owned companies to purchase assets overseas. It’s also putting money into government directed funds, such as the China Africa Development Fund and a similar vehicle for trade with North Korea. These vehicles facilitate Chinese trade and access to regions with resources (as is the case with Africa and North Korea, both destinations for Chinese investment in fisheries and resource extraction).

Current president Xi Jinping also wants to establish an ASEAN Infrastructure Fund, which would grant soft loans to Southeast Asian nations to build roads and railways that would facilitate better connections to China for trade. That may indeed represent better value in the long run than returns on Treasury Bills. Either way, China’s scale and trading power is going to allow the country to dictate access to fishery resources and markets over the long term.

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