Who’s buying all the beef?

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Speaker 1 This is the indicator from Planet Money. I'm Darian Woods.

Speaker 2 And I'm Waylon Wong. In October, we heard some good news for beef lovers.
A White House official told Reuters that the U.S. is going to ratchet up beef imports from Argentina.

Speaker 2 This was after President Trump talked to reporters about possibly buying Argentine Argentine beef.

Speaker 1 This sparked a question from indicator listener Sebastian Sanchez in Massachusetts.

Speaker 3 I grew up in Argentina and always miss Argentine beef as it is a staple of Argentine barbecue, asado.

Speaker 3 And last month I saw the White House announce a plan on quadrupling the amount of Argentine beef the U.S. purchases.
How does the US government actually do this?

Speaker 1 I love this question because President Trump's words in October were we would buy some beef from Argentina.

Speaker 1 So does that mean the new White House ballroom is going to have a giant freezer of these prized cuts?

Speaker 2 Or is the government going to force butchers to order from Argentina?

Speaker 1 Other deals have raised similar questions from our listeners. For example, Japan and South Korea are pledging to invest in the U.S.
as part of their trade deals. So who's actually doing the investing?

Speaker 2 Today on the show, we've got the answers. We visit an Argentine butcher and call up a seasoned trade negotiator to find out who spends the money.

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Speaker 1 To learn about how butchers were reacting to the Argentine beef deal, we went to one in New York with a cute name. El Galchito.
El Galchito. Little cowboy.
Translates. Okay, yeah, yeah, yeah.

Speaker 1 El Galchito's manager is Marcelo Cavelli, who showed me the Argentine beef cuts, all laid out inside the counter, marked with the country's sky blue flag. Rearby, this is the pitania,

Speaker 1 and then we have basillo flapsteak and the matambre, which is the rose beef that we usually put on the grill.

Speaker 2 I used to live in Buenos Aires, so I ate a lot of steak.

Speaker 2 And there was this one restaurant I'd always take visiting friends to because they would do this parlor trick where the waiters would cut your steak in front of you with a spoon to show how tender it was.

Speaker 1 That might be coming to the U.S. more.
Marcelo Cavelli says Argentine beef has this distinctive taste. It's different to American beef.

Speaker 1 But you know, still, it's, you know, it's not for everybody.

Speaker 2 Not everyone. Well, it is for Wayland Wong.
Part of Argentine beef's famous flavor is that a lot of the cattle is raised eating grass initially.

Speaker 1 It's not fully 100% grass-fed. At the end, they grain feed it to make it a little bigger because the cows are much smaller in Argentina.

Speaker 1 Marcelo said he'd be happy to play his part in porting more Argentine beef. Of course, if it's possible, yeah, why not?

Speaker 1 But he also said he had no idea how the White House announcement would actually work. So we looked into the details, and the answer is fairly simple.

Speaker 1 Basically, the US government is promising to lift a quota on Argentine beef. There is a certain amount that's allowed in each year, and then above that is charged a 26% duty.

Speaker 1 And by raising that quota significantly, it'll be cheaper for businesses like El Guateo to buy more beef.

Speaker 2 So it is still private companies buying the meat. We explained this to our listener, Sebastian.

Speaker 1 Does that make sense?

Speaker 3 That does make sense. So they would purchase more because it's cheaper.

Speaker 2 Yeah, basically no extra tariffs. Those political lines about we're buying the beef really just message simplification.

Speaker 1 So that's Argentine beef coming into the US. But in a country where the state actually runs more companies, like China, the answer to these types of questions might be different.
Take soybeans.

Speaker 1 When the US hiked tariffs on China, suddenly soybean farmers found they weren't getting any Chinese purchases.

Speaker 1 Now, in this case, it's relatively easy for the Chinese government to basically flick a switch. State-owned companies like Sinograin and Kofco import almost all the soybeans.

Speaker 1 And if the Chinese government wants to put pressure on the US, Xi Jinping can tell these companies to buy from Brazil rather than the US.

Speaker 1 And if China and the US sign a deal making up, up, well, then Beijing can tell them to buy soybeans from the US again. Of course, this is all complicated in the real world.

Speaker 1 There is right now a huge glut of soybeans in China. It stockpiled tons of soybeans from South America earlier this year.

Speaker 2 We got a related question in the indicator inbox from Claire LeCornu. Claire wrote in about other countries pledging to spend lots of money here in the US.

Speaker 6 My question is, I keep hearing about countries that have committed to invest hundreds of billions of dollars in the U.S.

Speaker 6 For example, after Trump's recent trip to China, he received commitments of investment from Japan and South Korea. What does it mean for a foreign country to invest in the U.S.?

Speaker 6 What does that actually look like?

Speaker 1 To answer this question, we spoke to Wendy Cutler. Wendy is senior vice president at the Asia Society Policy Institute and has worked on her fair share of trade deals.

Speaker 7 The Korea Free Trade Agreement, the Trans-Pacific Partnership Agreement, and I negotiated with China for many, many years.

Speaker 2 Those are the types of deals that cover all kinds of aspects of both countries' economies, from labor standards to copyright law.

Speaker 2 And getting to these deals is a much deeper process than what we've seen recently, where we have these agreements that are just a few pages long. I chatted with Wendy earlier this year about that.

Speaker 1 Wendy says you can think of basically two main ways this investment is happening. The first is private companies like HD Hyundai pledging spending.

Speaker 1 HD Hyundai has pledged to spend billions of dollars improving American shipyards. Wendy walked us through how the South Korean government might have gotten that investment commitment.

Speaker 7 The conversation would go along the lines of

Speaker 7 we are meeting again with the United States to negotiate a trade agreement. The United States has made it clear that they want pledges of increased foreign direct investment in the United States.

Speaker 7 Hyundai, can I count on you to pony up X billion dollars and announce a new plant in the United States?

Speaker 2 Wendy says these announcements make sense for the companies. Firstly, because they may have been planning them anyway.

Speaker 7 Because foreign companies accrue benefits by investing in the United States.

Speaker 7 However, the numbers that are being pledged now to kind of placate our president who loves big numbers and big investments, this is we're in a whole different dimension of foreign direct investment now.

Speaker 1 And another motivation for these companies is that a big announcement is generally helpful for them to curry favor with President Trump.

Speaker 1 And finally, even if the investment doesn't really make business sense, well, writing a press release is not a binding contract.

Speaker 7 I think some of the companies that are pledging, frankly, view these as pledges.

Speaker 7 And given that actual investments in the United States take multiple years, maybe some of them are hoping that over time, either this administration will forget about their pledge, or there'll be a new administration that won't really care about these pledges.

Speaker 2 And there's a second form of investment as part of these deals.

Speaker 7 What the Trump team is doing a bit differently is deals with countries like Japan and Korea to set up an investment fund.

Speaker 1 So, for example, there's now a specific fund jointly overseen by U.S. and Japanese government agencies.
Wendy says this fund works by picking projects for investment in the U.S.

Speaker 1 And then Japan channels both private and public money into areas like energy, semiconductors, or shipbuilding. That said, Wendy suggests looking at all these huge commitments with caution.

Speaker 7 I think it's easy to make a pledge and it's easy to come up with big numbers, but time will tell if these investments actually materialize. Many will, but I suspect some won't.

Speaker 2 So in all these trade deals, how the spending is done varies. For things like Argentine beef, that's just changing the rules to motivate private businesses.

Speaker 2 For deals with countries where the state is more hands-on, like China, it might involve the government directing state-owned enterprises to buy goods like soybeans.

Speaker 2 And for the investment pledges involving mixed economies like Japan and South Korea, the deals are kind of this hybrid, blending carrots, sticks, persuasion, and those press releases with the big numbers.

Speaker 1 If you have a question for us, you can email us at indicator at mbi.org. Or if it's more of a comment, leave us a review in your podcast app.

Speaker 1 This episode was produced by Cooper Cats for Kim with engineering by Robert Rodriguez. It was fact-checked by Sir Juarez.
Keikin Cannon edits the show and the indicators are production of NPR.

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