June 24, 2004

 

 

China, Brazil Reach Agreement Over Soy Dispute

 

China and Brazil have reached an understanding on the resumption of the lucrative soybean trade on Wednesday. However, no precise details were given with regards to when shipments will be accepted again.

 

Brazilian officials, meanwhile, said the ban on soybean imports had been lifted in one of their country's largest markets.

 

"The Chinese and Brazilian government have reached an understanding," an official at the State Administration of Quality Supervision and Quarantine (SAQSQ) disclosed.

 

The official refused to go into details of the understanding, nor reveal whether Brazilian soybean deliveries would be allowed to enter China again. Trade was halted in May when Chinese officials said a fungicide was found in shipments.

 

Soy is Brazil's third-largest export to China, valued at $1.6 billion (R10.09 billion) in 2003, up from $950 million (R5.99 billion) in 2002.

 

Brazilian embassy officials in Beijing said an agreement had been reached to remove the ban on 23 Brazilian trading companies. The first shipment of soybeans was expected to arrive to China next week.

 

"The Chinese side has agreed to allow the 23 exporters, previously suspended by the SAQSQ, to resume their exports to China," one official, who asked not to be named.

 

"The shipment will be inspected when it reaches China. And if it is in conformity with Chinese regulations, it will be allowed to enter."

 

China's tolerance levels on the imports were not stated in the agreement.

 

China implemented the ban after finding fungicide-covered soybeans -- meant to be used as seed -- mixed in with thousands of tons of commodity soybeans to be used for human and animal consumption.

 

The ratio of the seed beans to the commodity beans was not clear. However in normal trade, exporters are allowed a small mixture only if there are difficulties in keeping the two types separated, industry officials said.

 

Earlier this month, Brazil issued a new set of regulations to ensure quality exports in an effort to lift the ban that has blocked nearly 90 percent of Brazil's soy exports.

 

An earlier report had stated that the Sino-Brazilian soybean trade is expected to resume its smooth development momentum, as the two sides have reached common understanding on solving a trade dispute.

 

"The issue is only a technical one instead of a political one," SAQSQ officials were cited as saying.

 

The issue had arisen after Chinese soybean crushers began purchasing soybeans earlier this year. The prices had skyrocketed on the international market while domestic prices fell in China.

 

"A lot of the small crushers did not hedge their purchases. And when the prices went through the roof, they were stuck with their commitments at high prices while domestic prices were dropping," a Beijing-based agricultural expert monitoring the soybean trade said.

 

The trade dispute came after Brazilian President Luiz Inacio Lula da Silva's much-publicized four-day official visit to China last month to drum up "strategic cooperation" between the two huge developing countries.

 

Brazilian Foreign Minister Celso Amorim said previously that the case could be brought to the World Trade Organization without an agreement.