The deal made with China and the US over trade included soybean purchases from the US. However it seems to have handed Chinese businesses an advantage in negotiating with Brazilian shippers of soybeans. Brazilian export prices eased up as a result of the announcement, providing an opening for large purchases from Brazil.
The so-called US-China agreement on soybeans has yet to be confirmed by the Chinese side, so we still don’t know if it’s real. But the leverage for China over Brazil’s soybean producers has increased for real, and will for a while. This may be a much larger advantage for China as a whole than decreasing tariffs for US soybeans later on will be.
Stockpiles of soybeans are growing in the US as the harvest ends, with many unsold beans. The door to China trade may not come quick enough for many farmers, causing a need to store longer. Chinese soybean consumers and may get a better deal from both parties.
China expert Leland Miller, co-founder and CEO of China Beige Book International, says that trade is not the issue. The real question is control of supply chain choke points.
These could be supplies of scarce materials, such as rare earths, that are used in worldwide manufacturing processes. It could also be control over key ports or routes that supply products to the world.
Tariffs don’t matter much in this context; they can change, be skirted, or negotiated. Miller pointed out that worldwide, tariffs aren’t actually that high. Control over supply can be used to cut off countries or individual firms that aren’t doing what you want.
Looked at in this light, we can see the China-US struggle over ownership of the Hutchison Panama Canal ports as an effort to control a choke point in trade. We can also see the Houthi effort to gum up the Strait of Hormuz and the Red Sea as a control effort— to improve Israel’s behavior towards Gaza; with the help of Iran. The Hecksher-Ohlin theory of trade says that nations should trade when there is an imbalance in resources of whatever kind– labor, raw materials, educational capacity, agricultural land. And to exploit these advantages to defeat competitors is as old as warfare itself. Miller believes the Chinese are positioning themselves to wipe out economic competition when they see fit.
The US government will then become a participant, and perhaps a controller, of the free markets. That’s already happening as the US government takes a stake in companies here in the US. So it won’t be free enterprise, but government-influenced markets.
I don’t believe selling interests is necessarily our best course as a nation. Business becomes dealmaking in exchange for foreign cash, that evaporates into the hands of a few rich owners. The people, or workers, don’t benefit; instead they see the higher prices brought on by controls on supply.
Ships are changing their flag registry much more often than they used to. Much of this is because the older ships are gravitating to the ‘dark’ or ‘shadow’ fleet, which specializes in avoiding sanctions.
Many of these newly popular flag states have few regulations and little power to provide oversight on the registered ships. That’s what some ship operators want.
In addition, changing flags frequently circumvents enforcement by anyone. The law of the sea is that each ship is nominally required to enforce the laws of its flag state. But some of the flag states have no relevant laws, or very weak ones, and provide no means of enforcement. And jumping flags means that even if some enforcement is tried, it will likely not apply to the vessel by the time the complaint is heard.
African states are frequent choices of shipowners who choose to use alternate flagging. Aside from Liberia, a major flag state, which has a robust governance, many African states use flagging as a revenue source with no actions required. This threatens safety, environmental disaster, and seafarer welfare. The chart below from Clarkson’s, obtained from the article linked below, shows how changes in African registry have ramped up.
The flag-jumping is connected to the fracture in the shipping world between those operators aligned with the EU, US and the West, and those aligned with Russia, to some extent China, and other sanctioned states such as Iran. It’s likely to continue as long as the fracture intensifies.
Management of shipping, safety on board and in port, and welfare of seafarers, is taking a back seat in the meantime.
Supply Chain and Logistics 