May 11, 2018

The Honorable Robert Lighthizer

Office of U.S. Trade Representative
600 17th St NW
Washington, DC 20006

Re: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and
Innovation

Dear Ambassador Lighthizer:

Cargill appreciates the opportunity to provide comments on the U.S. Trade Representative’s (USTR)
proposed 301 tariffs and their likely impact on the U.S.-China relationship and the U.S. food and
agricultural sector.

Cargill is a Minnesota-based provider of food, agriculture, financial and industrial products and services.
Our purpose is to nourish the world in a safe, responsible and sustainable way. Founded in 1865 from a
single grain elevator, today Cargill is a globally integrated company with operations in more than 70
countries, employing more than 150,000 people worldwide.

Cargill directly employs more than 37,500 people in facilities and communities across 40 U.S. states.
Cargill's primary business activities in the U.S. include the origination, storage and handling of grain and
oilseeds; production of beef, poultry and egg products; animal nutrition products and services; food
ingredients, including starches, sweeteners, malt, oils, and chocolate products; as well as salt and
deicing technologies and plant-based bio-industrial products.

Cargill began doing business in China in the early 1970’s. We now have a presence across mainland
China, with over 50 locations and 7,000 employees. Our operations include six oilseed crush plants, 31
animal nutrition facilities, and a state-of-the-art integrated poultry production complex. Our business in
China is also a supplier and trader of cotton, cocoa and chocolate, starches and sweeteners and refined
vegetable oil. Cargill plays a pivotal role in linking the U.S. and Chinese markets through trade by helping
U.S. producers export their products to the growing Chinese market. Cargill's investments in China play
a critical role in linking our U.S. business and U.S. farmers and ranchers to customers in China.

We agree with the Administration’s intent to protect U.S. companies’ intellectual property rights (IPR) in
China and to address restrictive trade and investment policies and practices. We agree there are
opportunities to meaningfully reduce trade barriers and to provide a more level playing field for U.S.
farmers, ranchers and companies competing in the Chinese market. However, we are deeply concerned
with the potential enactment of unilateral tariffs and investment restrictions, and threats of escalating
tariffs, which could significantly and unnecessarily harm U.S. agricultural exports, business, communities
and jobs. This trade-restrictive approach could lead to the enactment of significant tariff and non-tariff
trade barriers against U.S. agricultural exports, as well as retaliation against U.S. companies invested in
China, bringing undue harm to our industry and the broader U.S. economy. As an alternative, we
encourage the Administration to work with our trading partners (in accordance with World Trade
Organization (WTO) rules) to engage in a constructive negotiation with China. We believe this approach
can achieve the Administration's objectives while avoiding the significant negative impacts that will
result if the U.S. imposes tariffs or investment restrictions, or both.

I. The Significance of US-China Agricultural Trade

Given the important interlinkages between our two economies, Cargill is encouraged that USTR has
made the U.S.-China bilateral relationship a priority. We believe a cooperative, mutually beneficial, and
constructive relationship will best serve our two countries in the long-term. China presents significant
growth opportunities for the U.S. agricultural sector, driven by shifting economics, demographics and
diet patterns. Currently, China represents roughly 20 percent of the world’s population, but only 7
percent of the world’s arable land. A rapidly expanding middle class is creating increased demand for
animal protein, animal feed and food ingredients. Today, China is the second-largest destination for U.S.
agricultural exports, with U.S. farmers sending $19.6 billion worth of agricultural goods to China in 2017
– a 136 percent increase over the past decade. These exports drive jobs and economic growth all along
the supply chain – for farmers, processors, shippers and more.

Of the U.S. agricultural products exported to China, soybeans play a unique and significant role. China is
the world’s largest importer of soybeans, accounting for over 60 percent of global soybean imports. The
United States supplies nearly 40 percent of that demand, second only to Brazil. One in every three rows
of U.S. soybeans planted by farmers is exported to China, our top export market. The Chinese demand
for soy for animal feed and meat production, linked to the U.S. through trade, is fueling growth,
investment and jobs throughout rural America.

China also serves as a key export market for U.S. sorghum, cotton, and cattle hides. Prior to China’s anti-
dumping/countervailing duty case against the United States, China was the top market for U.S. sorghum.
China is also the largest destination market for U.S. cattle hides, accounting for up to $1 billion in
exports annually.

As a global provider of key food and agricultural products, Cargill plays a unique role in linking the U.S.
and Chinese markets. We work with producers across the United States to source and market their
products and connect them to the growing Chinese food and feed markets. In China, Cargill’s oilseed
crush plants are importing and processing soybeans from around the world, including the U.S. heartland.

As an example, we work with farmers in places like Holdrege, Nebraska to market and move their
soybeans and other agricultural goods from the farm to nearby elevators for loading onto rail cars.
Once loaded, the soybeans travel by rail to port facilities in the Pacific Northwest, where they are
prepared for export. They then undertake an 18-22 day journey across the ocean bound for one of
Cargill’s processing facilities or customers in the food and feed sector. By truck, rail and boat, the two-
month 7,000-mile journey of soybeans from a farm in the interior of the U.S. to a crush plant in China
generates significant economic opportunities and employment.

These connections illustrate the substantial economic value and jobs created by U.S. agricultural trade
with China, and the consequences that losing access to this market would have on the broader U.S.
economy.
 II. Challenges Facing U.S. Companies

As a company doing business with China since the early 1970’s, we’ve seen firsthand the significant
value of engaging in the market, as well as the challenges it can present. We are encouraged by the
Administration’s recognition, as evidenced in the Draft Framework for Balancing the Trade Relationship,
that continued market access for U.S. agricultural products in China is an important priority in the U.S.-
China trading relationship.

Recent actions by the Administration have cracked the door for U.S. cattle ranchers and processors to
supply limited quantities of U.S. beef to the Chinese market. While commercial barriers for U.S. beef
exports still exist, this is an important step forward. The Administration’s pledge to open the U.S.
market for cooked poultry from China is also an important signal of U.S. commitment to two-way trade.

As the Administration works toward a substantive negotiation with China, we urge USTR to use this
opportunity to address some of the most significant challenges facing the U.S. agricultural industry in
China in a constructive and mutually beneficial way. Specifically, we encourage the Administration to
address the following:

• Adopt a Low-Level Presence (LLP) Regulation: China currently has a zero-tolerance policy for
the presence of yet-to-be approved genetically engineered (GE) traits in imported grains. When
technology companies choose to commercialize new GE traits before China approves the
specific GE crop or event, the not-yet-approved events are likely to end up in shipments going to
China, as the commodity grains commingle as they move through the supply chain.
Consequently, if just one kernel, bean or grain grown from the seed of an unapproved GE event
is found in a shipment of 50,000 metric tons, the entire shipment can be rejected.

In today’s global supply chain, where commodity crops from different sources are commingled
at silos, train cars, barges, ports and boats, China’s “zero tolerance” policy is simply unrealistic
and unworkable. CODEX has risk assessment guidelines that can be used to determine if a new
GE crop is safe for food and feed according to an international process. The industry
recommendation is a shipment be allowed to contain up to 5 percent of new GE events that
have been approved in the originating country and have obtained a food safety certification.
Chinese adoption of this approach would enable trade without posing risk to public health.

We would like China to adjust their regulatory requirements for grain and oilseed imports by
adding a Low-Level Presence (LLP) threshold allowance for the presence of GE crops.

• Market-Driven Imports: Currently, the Chinese government imposes tariff-rate quotas (TRQs)
on many agricultural commodities, including corn, cotton and sugar. The majority of these TRQ
allotments are awarded to State Owned Enterprises (SOEs) and the TRQ volume allocated to
private applicants is often too small to be commercially viable. Often, the allotments are given
to companies that do not use the crops they are allotted to import. Furthermore, the process for
acquiring quotas can be unreliable and opaque. We recommend eliminating the import quotas
for corn and cotton, which would allow the market to determine demand.
 • Alignment with CODEX and Organization for Animal Health (OIE): Currently, China does not
follow CODEX or OIE guidelines for meat imports, and instead utilizes its own unique and
unaligned standards. China’s unilateral standard is extremely onerous because it is stricter than
OIE standards, and because it does not apply the same standard consistently across all
countries. China’s practices burden global trade in meat products and adds unnecessary costs
along the supply chain, which are ultimately borne by Chinese consumers. We would like to see
China align their standards with the OIE and CODEX.

• Non-Discriminatory Treatment of Foreign Companies: U.S. companies operating in China

should not face discrimination and should be treated on a level playing field with domestic
Chinese companies. Conversely, Chinese companies should receive reciprocal treatment when
investing in the U.S. market. Currently, the language in China’s investment laws distinguishes
between foreign-owned and domestic businesses. China is currently revising and consolidating
its foreign investment laws, which is an opportunity to address this issue.

Resolving or achieving improvements on these issues would eliminate significant barriers for U.S.
agricultural producers and businesses, translating into growth in the U.S. export industry and the
creation of jobs in the United States.

III. Concerns with a Tariff-Led Approach

As stated earlier, Cargill has significant concerns with the potential enactment of unilateral tariffs and
investment restrictions against China, and threats of escalating tariffs, which pose significant and
unnecessary harm to U.S. agricultural exports, business, communities and jobs. This trade-restrictive
approach could lead to the enactment of significant tariff and non-tariff trade barriers against U.S.
agricultural exports, as well as retaliation against U.S. companies invested in China, bringing undue harm
to our industry and the broader U.S. economy. While we understand the Administration’s intent is to
generate substantive bilateral dialogue, we are concerned that this approach will not effectively
advance the goal of addressing distortive trade practices, and could result in the enactment of reciprocal
trade and investment barriers and an escalating trade war with long-term consequences in both
markets.

USTR has proposed enacting $50 billion in unilateral tariffs on Chinese products, with the potential for
an additional $100 billion, in an effort to bring balance to the trading relationship. China has stated
outright that it will respond reciprocally to any tariffs imposed by the United States. History has shown
that the use of tariffs is unsuccessful in achieving lasting solutions – the current challenges between the
United States and China are no different. U.S. enactment of the proposed tariffs will create even deeper
challenges in the U.S.-China trading relationship and further disruption that could result in short- and
long-term losses for the U.S. food and agricultural industry and the millions of U.S. workers along the
supply chain. There are no winners in a trade war.

In particular, China’s proposed retaliatory tariffs on soybeans will have significant impacts on the entire
U.S. soybean supply chain. In the short-term, U.S. soybean farmers will be the most negatively affected
due to declining prices. Long-term, these trade barriers will create a heavy tax on demand growth, as
well as inefficiencies across supply chains, further reducing the competitiveness of the U.S. agriculture
industry. Maintaining open markets and the competitiveness of U.S. agricultural producers is critical,
especially during periods of global oversupply and low domestic prices.

We encourage the Administration to work with like-minded global trading partners to create a strategy
that addresses the common challenges we face with China’s policies. We believe it is critical that U.S.
actions are consistent with our World Trade Organization (WTO) obligations and in accordance with
WTO rules, underscoring our commitment to a rules-based trading system. Ultimately, we urge the
Administration to engage in a constructive negotiation with China that reflects the importance of the
two-way trading relationship.

IV. Conclusion

As the global economy becomes increasingly integrated, United States' leadership in support of free
trade is an imperative for economic growth. The business community looks to the Administration to
safeguard and expand market opportunities for American businesses and workers who benefit from
access to foreign markets.

Consistent with the President’s stated commitment to support U.S. workers and grow the economy, we
urge the Administration to work together with China to develop a win-win solution that addresses the
challenges of U.S. companies in China. Through productive dialogue and negotiation, we believe the
Administration can achieve meaningful improvements in the U.S.-China trade and investment
relationship while building even stronger US-China economic ties.

In summary, Cargill appreciates the opportunity to provide our views on the potential impact of the
proposed Section 301 tariffs and the importance of the US-China relationship. We look forward to
working with Congress and the Administration on this and other issues going forward.

Respectfully Submitted,

Devry Boughner Vorwerk

Corporate Vice President, Global Corporate Affairs