Since 2003, when China first became a net food importer, the gap between its imports and exports has continued to widen. By 2019, it had become the world’s largest importer of agricultural products. Today, the quality, availability and accessibility of agricultural products increasingly define China’s food security situation.
In this scenario, China has the potential to exercise leadership in making its agriculture trade more environmentally sustainable, echoing the top-level discourse of “ecological civilisation” and China’s subscription to the Glasgow Leaders’ Declaration on Forests and Land Use, launched at COP26 climate talks in November.
Pressures for greater environmental accountability from consumers and buyers downstream in the global supply chain have also been mounting. This largely stems from producer countries’ long-term ineffectiveness in mitigating the environmental footprints of agricultural commodities. There have even been calls to boycott some products.
In recent years, international actors, from governments to NGOs, have approached Chinese civil society organisations to understand China’s stance and progress in addressing the question of soft commodity sustainability.
Through research, analysis and project implementation, the Global Environmental Institute (GEI), a leading Chinese NGO of which I am part, has developed its role in joining forces to tackle deforestation.
A pattern in agriculture-induced habitat loss
Data-driven transparency initiative Trase’s 2020 Year Book shows that half of the deforestation risk embodied in exported soy and beef from Brazil is concentrated in only 1% and 2%, respectively, of the municipalities producing these commodities.
We worked with Trase in 2021 to probe whether or not China imports from these municipalities, and if it does, how dependent on them China is. We analysed China’s sourcing patterns in Brazil and Argentina between 2009 and 2019 and found that habitat conversion linked to the export of two main soft commodities – soy and beef – from both countries to China is also spatially concentrated.
Take China’s imports of Brazilian soy during the decade from 2009 as an example. They are sourced from three producing regions: the central-east region of Matopiba, which is the portion of the four states of Maranhão, Tocantins, Piauí and Bahia that lies within the Cerrado biome; the central-west state of Mato Grosso; and southern Brazil, including the states of Paraná, Santa Catarina and Rio Grande do Sul.
Soy-induced habitat conversion was significant in Matopiba, the newest soy frontier in Brazil, and which accounted for 9% – some 6.1 million tonnes – of the country’s soy exports to China in 2018. In particular, six municipalities had extremely high rates of farming-induced habitat conversion.
Buying agricultural commodities from these municipalities entraps a consumer market and exposes it to the risk of so-called “demand-driven environmental destruction”. China cannot simply ignore these “troublemaking” hotspots and switch its sourcing locations to the other ones.
Although southern Brazil and Mato Grosso have comparatively lower degrees of habitat conversion embodied in China’s imports, they still face sustainability risks and environmental constraints.
Southern Brazil is away from recent deforestation hotspots and has provided China with more than one third of China’s Brazilian soy imports from for over a decade. We found that it has only five municipalities with notable level, albeit low, of habitat conversion.
However, in 2021, its production was significantly affected by extreme weather. Production in the southern state of Rio Grande do Sul, the country’s second soy-exporting state to China, fell 46% last year due to an unusual drought. Climate change caused unexpected and significant fluctuations in local productivity. The region also has limited capacity to expand agriculture given the erosion and fragmentation of agricultural land.
Soybean produced in Mato Grosso state accounts for 14% of China’s imports of the crop
Mato Grosso is so far relatively free from such constraints. In 2020, the state contributed to 29.27% and 15.49% of Brazil’s total soy and beef production, respectively. More than half of those commodities produced in the state were exported to China that same year. Mato Grosso accounted for 14% of China’s soybean imports in 2020 and 6.8% of beef imports. Therefore, the state plays a dominant role in the Sino-Brazil agricultural trade.
Our analysis found that there was a comparatively low degree of habitat conversion associated with China’s soy imports from Mato Grosso in 2018. In fact, only two municipalities have moderate levels of deforestation, despite the state being surrounded by three important biomes – the Amazon rainforest, the Cerrado savannah and the Pantanal tropical wetlands. This partly explains why in 2015 it was one of the two Brazilian Amazonian states to receive funding from the UK and Germany through the Brazilian National REDD+ Strategy.
Through interviews with multiple stakeholders and analysis of policy documents, we found that, to some extent, Mato Grosso achieves a synergy between agriculture and biodiversity conservation in a number of ways. Primarily, they involve administrative-regulatory innovations such as a jurisdictional approach (a form of landscape management within clearly defined boundaries that has a high level of government involvement and participation from other stakeholders), conditional farm credit access, the revitalisation of preservation areas, and supporting local food chains and family farming. Technological breakthroughs such as degraded-land recovery, livestock-forest integration and digestible animal feed also play a part.
To some extent, Mato Grosso achieves a synergy between agriculture and biodiversity conservation
However, the state’s law enforcement capacity still needs to be strengthened to combat illegal habitat conversion, especially in the municipalities of Paranatinga and Feliz Natal.
Based on these findings, we argue that to promote climate and nature-friendly agricultural practices and reduce supply chain volatility, attention should be directed to those small number of high-risk areas, such as the six soy-producing municipalities in Matopiba. Chinese stakeholders need to put more emphasis on these few risk-intensive areas as part of their long-term sourcing strategies. Deforestation linked to beef affects more municipalities, requiring more resources and coordination.
We also recommend that Chinese businesses take a conservative approach to investing in agriculture and agriculture-related sectors, including infrastructure in southern Brazil. As for Mato Grosso, its policy and technological innovations mean that GEI finds it constructive to engage with the local government and industry actors, acknowledging its advances while helping it improve its governance capability.
A bilateral partnership to nurture good practice
GEI is one of the first Chinese NGOs to “go global”. It is the first Chinese NGO that investigated the environmental and social performances of Chinese private companies in their timber trade with Africa and Southeast Asia, back in 2007. It has since worked in 11 countries in these two regions to address environmental externalities associated with the bilateral trade.
GEI has successfully worked with Chinese government agencies including the Ministry of Commerce, the National Forestry and Grassland Administration and the former Ministry of Environmental Protection (now the Ministry of Ecology and Environment) to introduce a series of guidelines to regulate the overseas investment and trading activities of Chinese companies, including the landmark 2013 Guidelines for Environmental Protection of Overseas Investment and Cooperation.
In 2015, GEI signed an MoU with the government of Myanmar to combat the illegal timber trade through a legal verification scheme. This was followed by a high-level MoU signed between the Chinese and Myanmar governments in 2017 that lead to the establishment of a high-level working group for bilateral coordination and cooperation at various levels that involved multiple stakeholders.
Now, GEI is taking this approach to promote a sustainable China-Brazil agriculture trade.
Over the course of the last year, we have been working with the Mato Grosso state government to acquire information for our Chinese partners about Brazil’s agricultural regulation and the bilateral trade relationship.
GEI found that the state government has been interested in learning about the attitudes of the Chinese government, business and consumers towards the environmental and social sustainability of trade between Brazil and China. Therefore, GEI and three parties from Mato Grosso, the state government included, signed a Memorandum of Understanding (MoU) on 8 March 2022.
The initiative will chart a pragmatic roadmap for creating a market in China for sustainably produced beef products from Mato Grosso
As well as the Mato Grosso state government, the other MoU signatories were the Federation of Agriculture and Livestock of the State of Mato Grosso (FAMATO), a chamber of commerce for farmers’ unions, cooperatives and traders, and the Mato Grosso Meat Institute (IMAC), a beef-centred research and technology institute.
The partnership will work at both the bilateral and domestic levels. Bilaterally, all four parties, with the participation of private actors from both countries, will chart a pragmatic roadmap for creating a market in China for sustainably produced beef products from Mato Grosso. For these products to be recognised in the Chinese market, parties will jointly explore the possibility of establishing certification systems in China for sustainably produced beef products, including those that emit net zero carbon in their production.
In order to define “sustainable”, parties will identify existing good practices and what can be realistically achieved, including, but not limited to, zero-deforestation, low carbon emissions, and the promotion of organic practices and family farming. We will embed these definitions and criteria into the roadmap through a two-pronged approach. One part is the promotion of environmentally benign technological intervention in land use, animal-feed production and cattle ranching in Mato Grosso. The other is market integration between China and Mato Grosso via establishing compatible certification frameworks.
Inside China, all four parties to the MoU will reach out to potential buyers, and develop such market-based mechanisms as certification to ensure market accessibility as well as possible financial mechanisms that can enhance affordability.
Hope of scaling up
GEI believes that acknowledging and rewarding good governance and best practices in producer countries can lead to meaningful transformation of the production and trade of agricultural commodities. We anticipate that the roadmap we are laying out for Mato Grosso can be scaled up and applied to those small number of municipalities in Brazil whose trade with China is still causing significant deforestation and habitat loss.
But that’s not the end of the story. We are also planning to establish a pilot project to explore the potential of low-carbon farming systems in China. This involves designing low-carbon agricultural practices, and establishing standards to guide and certify low-carbon farming with the help of Brazil’s experience in this area, including its existing practices, off-setting methodology, certification and management of markets.
This MoU demonstrates that Chinese civil society organisations have started to pay serious attention to sustainability issues in China’s global supply chain. It shows that producer and consumer countries do share a common interest in promoting ecologically benign practices and in working together towards a greener supply chain.