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  December 19th, 2016 | Written by

Iowa Governor Terry Branstad Named Ambassador to China

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  • The appointment of Branstad as ambassador to China signals a policy of negotiation, not ultimatums.
  • China’s barriers to U.S. exports have been gradually reduced since China’s 2005 WTO entry.
  • China's acceptance of U.S. exports hasn’t been fast enough for manufacturers, but markets are opening.

One of the most consistent messages sent by Donald Trump during the presidential campaign was directed at China—and it wasn’t positive. He accused them of unfair trade deals, currency manipulation and dumping products on global markets. That was going to stop if he became the new sheriff in town.

But as our outgoing president once remarked, elections have consequences. And one of the consequences of the November outcome has been a softening of Trump’s positions on several issues, which has disappointed his more ardent supporters but relieved some of his detractors.

That attitude adjustment appears to apply to China as well, with Trump’s appointment of Iowa governor Terry Branstad as ambassador.

It’s a decision that signals a preference for friendlier U.S.-China relations, especially in the aftermath of Trump’s controversial phone conversation with Taiwan president Tsai Ing-wen. The previous expressions of concern out of Beijing were followed by a much more positive reaction to Branstad, who has known Chinese President Xi for more than 25 years.

In 1985, while serving his first term as governor of Iowa, Branstad hosted a Chinese delegation that included the future President of China. During that trip he bypassed a hotel suite and instead stayed in the spare bedroom of a family in the town of Muscatine. It was his first visit to America, and left such a favorable impression that, as Vice-President, Xi Jinping returned to Iowa in 2012.

Doing Business With Friends

Branstand has frequently referred to President Xi as “an old friend,” and that likely played a role in Iowa being a preferred provider of corn and pork to China. A positive personal relationship should help to avert the trade war many anticipated after Trump’s victory.

But the issues between the two nations remain, beginning with the trade imbalance that finds the U.S. importing four times as many goods from China as it exports, despite the popularity of a wide range of American products (from Chevy trucks to Victoria’s Secret lingerie) among the growing Chinese middle class.

By 2020 China’s consumer market will reach or surpass $6.5 trillion according to the Boston Consulting Group. Companies like Macy’s, Costco, and Target are eager to gain greater access to that burgeoning market.

And then there are the bigger deals: travel, at a time when China is expected to add more than 6,800 aircraft over the next 20 years, and agriculture, impacting both farming equipment and commodities like soybeans.

On the campaign trail Trump threatened a tariff as high as 45 percent on Chinese exports to force a change in policy. But government officials and diplomats that know China well believe threats are the wrong approach, and certainly won’t help Boeing build planes or Caterpillar build tractors bound for Beijing.

The appointment of Branstad signals a less confrontational opening salvo that indicates a policy of negotiation, not ultimatums. China’s barriers to U.S. exports have been gradually reduced since China’s 2005 entry into the World Trade Organization. It hasn’t been fast enough for American manufacturers, but markets are opening.

High Hopes in Agriculture

Given Branstad’s Iowa roots, agriculture figures to be a priority. The state is already China’s third-largest export market, with total exports of $1.2 billion in 2015.

If the new ambassador can ease lingering tariffs and exclusions on certain agricultural products, enacted after trade disputes dating back decades, that alone would represent a significant new opportunity to reduce the deficit without punitive tariffs. China would get quality products, and Trump would get the “better deal” he campaigned on.

“He’s going to focus on ways parties can negotiate and reach a deal that benefits each side,” said Mike Ralston, president of the Iowa Association of Business and Industry. “I believe that’s really good for Iowa and the United States to have somebody in this role who is focused on economic development, on job creation and conducting business with each other.”