Republicans could suffer from Chinese company’s failure to buy Montana beef

The project’s apparent collapse has surfaced in the state’s U.S. Senate race, one of several contests that could determine whether the Republicans retain control of the chamber or surrender it to the Democrats. The vanishing beef deal shows how the souring of the U.S.-China relationship is reshaping U.S. politics, making a liability of once-beneficial ties and placing a premium on hard-edge rhetoric toward Beijing.

In Montana, Gov. Steve Bullock, the Democratic challenger, has criticized Republican Sen. Steve Daines, who claimed credit for brokering the beef deal, for being too cozy with the Chinese government. The state Democratic Party has run ads calling Daines “China’s cheerleader” and accused him of helping outsource jobs as a business executive in the 1990s, a charge he denied in earlier campaigns.

“China is not popular,” said David Parker, a political scientist at Montana State University. “Montana’s a state where there’s a fear of the other, a fear of big companies and big government. And China is the new version of that.”

Beijing’s failure to contain the coronavirus — on top of a trade war that punished Montana farmers — has eroded China’s standing and created an opening to attack lawmakers who promoted transpacific ties. In a Pew Research Center survey this month, 73 percent of Americans said they held an unfavorable view of the country.

Daines worked in China for several years in the 1990s as an executive with Procter & Gamble and spent a decade managing Asia-Pacific sales for a software company. To promote U.S. beef as a senator, he carted a cooler full of Montana steaks to Beijing for a 2017 meeting with Chinese Premier Li Keqiang and later hosted Chinese Ambassador Cui Tiankai at an agricultural forum in Montana.

“In 2017, Sen. Daines said he secured a ‘landmark’ beef deal with China for Montana ranchers. Three years later, there’s little evidence Montana beef was sold to China through that deal,” Bullock tweeted this month. “So after years of broken promises, Montanans want to know: Where’s the beef, @SteveDaines?”

As China has grown more unpopular, Daines has pivoted from casting his overseas business experience as a plus to hammering Beijing for mishandling the coronavirus.

“I’m cracking down on China,” he said in one commercial.

The latest MSU poll effectively shows a dead heat with Daines trailing Bullock 49 percent to 47 percent, well within the margin of error.

Apart from its role in this key Senate race, the Montana beef arrangement also reflects the evolution of U.S.-China ties in the Trump era. JD.com was among nearly three dozen business deals announced by the Commerce Department in November 2017, when Chinese officials still believed they could manage a businessman-president by emphasizing potential profits.

Wrapping up his official debut in the Chinese capital, Trump touted the business ventures — which involved companies such as Boeing, Caterpillar and Dow Chemical — as “tremendous, incredible, job-producing agreements.”

But the reality quickly fell short of the marketing hype — and the U.S. approach to China toughened.

Many of the deals, including JD.com’s, were nonbinding memorandums rather than legally enforceable contracts. Under its agreement, JD.com pledged to import a total of $200 million in Montana beef from companies belonging to the Montana Stockgrowers Association (MSGA) for online sales to Chinese consumers.

The Chinese company calls itself China’s largest retailer and second-largest e-commerce company, behind only Alibaba. More than 415 million customers use the service annually, and revenue last year was $83 billion, according to the company.

JD.com officials were enthusiastic about the deal as it came together, seeing it as offering a competitive edge over Alibaba, said James Green, who was the senior trade official at the U.S. Embassy in Beijing at the time.

“But by a couple of weeks afterward, they literally were not answering phone calls from the embassy. It seemed pretty clear this was a figment of someone’s imagination or was maybe an aspirational deal,” Green said. “They were not that serious about the specifics of it.”

JD.com did not reply to an emailed request for comment.

“It just went flat. Nothing ever happened,” said Errol Rice, the executive who signed the agreement for MSGA. “It just felt like, by the time we got back to the airport in Beijing, there was probably no intention to do the deal.”

The arrangement blossomed through the efforts of Daines’s office and the China General Chamber of Commerce in New York, Rice said. The chamber is a Chinese government-funded “united front” organization devoted to advancing the ruling Communist Party’s interests.

As the largest organization representing Chinese companies in the United States, the chamber says in its 2017 annual report that it “facilitated” the deal, sealed in a signing ceremony witnessed by Commerce Secretary Wilbur Ross and Chinese Vice Premier Wang Yang.

Many of the agreements pegged to the president’s visit were assembled as gestures of support to both governments more than concrete commercial commitments, according to Scott Kennedy, a senior adviser on China at the Center for Strategic and International Studies. Along with the Montana beef deal, multibillion dollar energy projects planned for West Virginia and Alaska also have failed to materialize.

The business plans emerged three months after the president had authorized an investigation that would lead to unprecedented tariffs on Chinese products.

“It’s not where the relationship has gone,” said Kennedy, referring to the cooperative ventures. “Nothing like that would be possible now.”

The tariffs on Chinese goods, which began several months later, probably sapped whatever interest the Chinese had in fulfilling the JD.com plans, according to Walter Schweitzer, president of the Montana Farmers Union.

“I blame President Trump and the trade war,” he said. “We spent years trying to develop that market and overnight we lost it across the board.”

To date, JD.com has announced no purchases of Montana-sourced beef. No site has been selected for the slaughterhouse, though construction was scheduled to begin “as early as the spring of 2018,” according to the agreement.

In a statement posted on the MSGA website, Fred Wacker, the group’s president, described the JD.com deal as “on hold.”

The Commerce Department did not respond to a request for comment. Spokespersons for Daines’s Senate office and his campaign also did not respond.

Some in Montana still harbor hopes of a Chinese windfall. China’s beef consumption has increased in recent years as the country grew more prosperous. Brazil, Australia and Argentina supply two-thirds of the country’s $8.4 billion in annual imports, according to the U.S. Department of Agriculture.

China blocked U.S. beef shipments in 2003 after a case of bovine spongiform encephalopathy, or mad cow disease, was discovered in an animal imported from Washington state, lifting the ban only in mid-2017.

U.S. exports have grown since then, reaching $97 million in the first eight months of this year, up from $44.7 million during the same period last year, according to the U.S. Department of Agriculture.

Yet China trails well behind the top U.S. export markets: Japan bought close to $2 billion worth of American beef last year, and South Korea took more than $1.8 billion, according to the U.S. Meat Export Federation.

In January, Trump and Chinese Vice Premier Liu He signed a partial trade deal, which calls for China to increase its purchases of U.S. farm products by $32.5 billion by the end of 2021. On Friday, the administration said Chinese buyers already had made “substantial progress” toward meeting this year’s target.

“We see a lot of potential in that market,” said Kent Bacus, director of international trade for the National Cattlemen’s Beef Association.