Opportunities for the agricultural sector due to trade war?

Het Financieele Dagblad (FD) recently reported that China is increasingly turning to Dutch companies. It seems to be a result of the trade war with the United States, which has been going on for over a year now. The Dutch agricultural and horticultural sector in particular benefits from the trade war.

I would like to zoom in on the above development. But before I do that, I would like to say that above all I see the uncertainty surrounding the trade conflict as crippling for world trade. It affects economic growth and investment, making it tangible for all companies. That said, the trade war also presents a variety of opportunities for the individual, resourceful entrepreneur; certainly the European and therefore also the Dutch entrepreneurs.

Changing trade flows
I gave in before a blog on Boerenbusiness shows that trade flows are changing, partly as a result of the trade conflict. This can also be clearly seen with regard to products such as soy and cotton. China is buying South America empty because the United States has become so expensive. Other agricultural products that offer opportunities are maize, wheat and pork† Why those products? Because they have become tens of percent more expensive for the Chinese due to Trump's trade tariffs.

Logically, the Chinese then go shopping elsewhere. This certainly applies to technology. For example, the Netherlands can look forward to an increasing interest in our agricultural technology. By buying them, China can further strengthen its ambition to be self-sufficient. Because that need has only become stronger among the Chinese as a result of the trade war.

Self-sufficient
It will also take some time before China is self-sufficient in agriculture. For the time being, there is only an increasing demand for agricultural knowledge, high-quality starting material and agrotechnology. Particularly in horticulture, dairy and pig farming. The Netherlands is well positioned for this.

Do not forget that the average Chinese has more and more to spend. With an increase in the average income, the demand for quality food grows. In China, the agricultural sector is still dominated by millions of small-scale farms. The Chinese consumer has little confidence in the safety of products from their own country. This is partly due to all kinds of food scandals. The Chinese who can afford it prefer to buy food from abroad. The Netherlands has an excellent agricultural image in China.

The Chinese love our products and knowledge. See projects such as 'Belt & Road' and 'Made in China 2025'. By acquiring companies worldwide, they hope to make up for their knowledge gap. However, Europe wants to protect itself against this. It must be prevented that China becomes too powerful, although most individual companies do not want that. They support free enterprise and seize the opportunities offered by a trade war. The fact that with the collaboration they are also obliged to 'hand in' their knowledge within a joint venture is an afterthought for many.

Doing business remotely
I would like to advise entrepreneurs who want to take a step towards China that they can do business remotely with the Chinese. Whether it is fertilizer, sowing seed or baby milk; more and more trade takes place via the internet. China is at the forefront of e-commerce. Include this in the export strategy, although this must of course be done carefully.

Johan Geroms

Johan Geeroms is Risk Director at Euler Hermes, the world market leader in credit insurance and corporate debt collection. In his blogs, Geeroms often focuses on developments in the agricultural sector.

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