CG: China is revered for always thinking three steps ahead of its competitors, and for always building for the long term. Is it really better than other countries at “picking winners” in agriculture?
JL:China has made many major mistakes in agriculture. The Straw for Beef program is a good example. Enormous amounts of money were invested in this program. However, if you went to China today, you would find no sign of it.
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Whole industries have become fashionable for short periods in China: fine wool in the ’80s, beef then dairy in the 1990s, sheep meat and then horticulture, and so on. Heavily subsidized initiatives are launched to develop these fashionable industries. The Straw for Beef program was initiated in the early 1990s to promote beef production and to get rid of the huge volume of straw which was being created through the triple-cropping program. Traditionally, the straw was burnt, but pollution is a huge problem. Parts of China are under smoke for most of the year. So the Straw for Beef program was designed to take the straw left over after harvest and convert it to silage, and use the silage to maintain ruminant animals — in particular beef animals, but also sheep and goats.
The Straw for Beef program was heavily subsidized, and it would never have existed without subsidies. So when the subsidies were removed, the program collapsed.
The industries they have picked for special support have always run into trouble once the subsidies are phased out — the fine wool industry is now almost defunct. Beef cattle numbers are also down as much as 30 per cent in key beef-producing areas because the opportunity cost of labour is too high. Feeding ruminant animals by cut-and-carry methods is just too much work when so much income for rural people is coming from off-farm income.
Some of the very large dairies they have built are unviable without large input subsidies and other government support. Sheep meat is still going well, but it too is headed for dreadful oversupply problems.
So the Chinese have not been that successful in picking winners.
CG: But don’t the Chinese have huge resources to support their agriculture?
JL:Unfortunately, like Canada and Australia, they have cut back on R&D in some industries, and particularly in extension. The number of salaried government workers in agriculture has been reduced tremendously in China — perhaps by about half a million people.
Wherever you go today, you will find officials are short of money and anxious to get an alternative part-time job. So picking winners has diverted money in agriculture away from traditional activities like extension into industries which have turned out to be lemons.
CG: I thought China is producing legions of scientists in order to boost its agricultural productivity.
JL:Agriculture in China is a surplus industry, despite all the rhetoric you hear from national leaders. They are spending huge amounts of money on top-down efforts to control pollution in the rangelands and waterways. So the R&D being used is often to correct pollution problems or develop better management strategies for what was traditionally a low-technology high-polluting activity.
CG: When the Chinese economy first showed explosive growth, we could immediately see the potential for net-exporting countries like Australia and Canada to supply food to the Chinese. Now we can see the reality is slightly more complicated. Access is a key issue. So what can we do?
JL:China is very good at producing large quantities of generic grades. But the middle class is growing rapidly and this group of Chinese consumers likes a more classy type of product, which is also true of the middle class in Japan, just as it is in Canada or Australia.
The income elasticity for calories in China is pretty low. They don’t want just more low-grade generic products. What they are after is quality… for appearance, for brand, for an imported label. The way Australians have succeeded in the beef and sheep meat industries, and in particular the offal industry, is by selling good, safe, high-quality, well-packaged products into the higher income markets.
The niche market for better quality is there for Canada and Australia. Australia’s quality beef, our lamb, our fine wool succeed in China because of their quality. These products do not compete with the low-grade generic Chinese products.
CG: The point you’re making is that we shouldn’t build our marketing plans on the headlines we read about China.
JL:The official story in Japan, China or many other Asian countries is often a long way from the real story. The difference between the two can only be bridged by Policy Intelligence. Agricultural exporters such as Australia and Canada need to invest in learning the real story.
Since policy intelligence is a public good, the investment needs to be made by the exporting industry and the exporting government — preferably in partnership. To some extent, Australia seems to have been better than Canada at gathering policy intelligence in Japan and China and using it to advantage. This has been especially true for products like beef, wool and wheat but also for horticultural exports and wine.
One crucial step in the gathering of policy intelligence is to put trade attachés in the embassies in Japan and China who are both knowledgeable about agriculture and who can speak the local language. Most importantly, these officials need to be protected from the time-consuming and unproductive demands of visiting businessmen from their own country.
CG: If the Canadian government asked you for advice on its China strategy, what would you tell them?
JL:The Ministry of Agriculture has been gutted in many ways. The ministry in Beijing is smaller than it used to be, and much less powerful.
A lot of power has been decentralized to provincial levels. Inner Mongolia has an army of people working on the dairy industry. Canadian provinces might be advised to work on agricultural co-operation with provinces in the so-called rust belt provinces of Liaoning and Jilin which have been overlooked by Australia and America and where the climate is not unlike Canada.
Our research team’s picture of Chinese agriculture has been built up over the last 25 years largely because we have been able to get funding to go there and pay Chinese to assist us with our work in a number of different ways, sometimes with beef, sometimes with sheep, sometimes rangeland development. We put together a large number of projects that were funded by different agencies — both industry and government — which enabled us to continue our research in China every year since 1989.
CG: Earlier in your career, when China was closed to many western observers, how did you get the doors to open?
JL:In one word, it was persistence. From 1986 on, our research team has kept going back. Chinese officials, scholars and businessmen value and trust long-term professional relationships built over many years. Of course, I’ve also had a few lucky breaks. For example, in 1992 I wrote an article for the University of Queensland newspaper called “The Next Century Belongs to China.” One of my postgrads at the time had a father who was a key member of the Chinese party. He gave the article to his father who had it published in the Chinese Communist newspaper with a circulation of 93 million — the Red Rag as it is called. Everywhere I went for a couple years afterward I was referred to as the guy who wrote this article. You can imagine the benefit of that — that article opened all sorts of doors for the next five years.CG
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For the last 35 years, John Longworth has been a key driver in Australia’s phenomenal export success to China and Japan. The Chinese know it too. As emeritus professor at the University of Queensland and with over 100 articles and 13 books, Longworth’s views are watched as closely in China as anywhere.
