SUCCESSFULLY regenerating the debate on trade liberalisation, United States President Donald Trump has stayed true to his electoral promise — of bridging the US trade deficit with the aid of protectionist trade policies — and recently slapped import tariffs of 25 per cent on steel and 10pc on aluminium.

Approximately 14pc of aluminium and one per cent of US steel imports originate from China. As a retaliatory measure, China imposed 25pc tariffs on import of soybeans from the US.

Pakistan must seize this opportunity for the development of the soybean production sector in the country.

China, by far the largest consumer and importer of soybeans from the US, derives its demand from the rising disposable incomes in the country that have boosted its population’s appetite for meat, poultry, fish and dairy products.

As soybean is a major source of protein in animal and fish feed, it has seen an almost vertical growth curve. Soybean prices in China will see a significant increase following the tariffs, causing the animal feed industry to try to meet its supply shortfall from other sources.

With the ongoing US- China trade war, Pakistan, with its immense cultivation potential for soybean, must capitalise on its opportunity to increase the crop’s exports to China

The Chinese government has already started to encourage and incentivise domestic production of the legumes by announcing subsidies for soybean farmers in its North-eastern provinces of Liaoning, Jilin and Heilongjiang as a means to shield its economy from the tariffs’ adverse consequences.

In the short run, the animal feed industry may shift to soybeans from Brazil, Canada or India. In the longer run however, China must seek more reliable and diversified sources to meet its growing demand for this particular legume.

Interestingly, the US has seldom been a reliable trade partner. The latest evidence of this are its recent spats with its largest trading partner- China, its withdrawal from the Trans-Pacific Partnership, and its insistence on renegotiation of the North American Free Trade Association.

In a similar vein, the Nixon administration in the US put an embargo on soybean exports to Japan in the early 1970’s. This proved a serious threat to Japan’s food security. Soybean is to Japan what wheat is to Pakistan- a major staple food.

Subsequently, as a future safety net, Japan heavily invested in the soybean sector in Brazil. The Japanese investment led to Brazil attaining the status of the second-largest producer of soybean after the US.

Currently, Brazil exports soybean worth approximately $19 billion annually. Drawing on the Japanese example, China and Pakistan must seize this opportunity for the development of the soybean production sector in Pakistan.

For China, it would mean diversifying its supply base and further strengthening its trade relationship with Pakistan. For Pakistan, besides its lucrative export potential, soybean can be utilised in edible oil production, as it is an oilseed crop.

While consumption of edible oil has accelerated following our population growth, local oil production meets less than 22pc of the demand with the rest coming from imports, draining our foreign exchange reserves.

In such circumstances, the promise of an untraditional oil crop like soybean is worth exploring. It is pertinent to note that soybean is a restorative crop rather than an exhaustive one like cotton.

Restorative crops take in nitrogen from the atmosphere and replenish the nutrients to the soil. Growing the exhaustive and restorative crops in rotation ensures the soil’s health and fertility.

For Pakistan, cotton, rice and sugarcane can be grown in rotation with soybean, fulfilling each other’s nutrient requirements. According to the Pakistan Agriculture Research Centre estimates, a mere 1000 hectares of soybean are cultivated in Pakistan at present.

Agricultural researchers posit that an immense unutilised potential for the cultivation of soybean exists in certain well-irrigated districts like Jhelum, Vehari, Multan and Attock in Punjab, Nawabshah and Hyderabad in Sindh, and Swat, Mardan and Swabi in Khyber Pakhtunkhwa.

The time is ripe for local growers and entrepreneurs to seize this opportunity that has presented itself as a result of global trade spats and help Pakistan realise its immense potential.

The writer is an Assistant Director at the State Bank of Pakistan, Karachi.

Published in Dawn, The Business and Finance Weekly, June 11th, 2018