In a long-anticipated signing, the U.S. and China have agreed to the first phase of a multi-level trade deal that heavily features agricultural products. The deal is being celebrated by some in the White House as a major victory, but those that wanted ultimate structural changes with China will have to wait until a possible Phase 2 or 3 deal are negotiated post-U.S. election.
According to a release from the United States Department of Agriculture (USDA):
The Expanding Trade chapter includes commitments from China to import various U.S. goods and services over the next two years in a total amount that exceeds China’s annual level of imports for those goods and services in 2017 by no less than $200 billion. China’s commitments cover a variety of U.S. manufactured goods, food, agricultural and seafood products, energy products, and services. China’s increased imports of U.S. goods and services are expected to continue on this same trajectory for several years after 2021 and should contribute significantly to the rebalancing of the U.S.-China trade relationship.
Secretary of Agriculture Sonny Perdue is very pleased with the deal and the negotiating strategy of President Trump.
“This agreement is proof President Trump’s negotiating strategy is working,” says Perdue “While it took China a long time to realize President Trump was serious, this China Phase I Deal is a huge success for the entire economy.”
“This agreement finally levels the playing field for U.S. agriculture and will be a bonanza for America’s farmers, ranchers, and producers,” says Perdue. “China has not played by the rules for too long, and I thank President Trump for standing up to their unfair trading practices and for putting America first. We look forward to exporting to Chinese customers hungry for American products.”
Market analysts are cautiously optimistic about the deal based on several big variables such as China’s actually intention to comply and the commodity demand created by African swine fever.
At first glance, this phase-one trade deal can correctly be considered a “game-changer” as far as a negotiated agreement with China. There is still every reason to remain skeptical on China following through, based on its track record, but the agreement itself is big! #oatt
— Arlan Suderman (@ArlanFF101) January 15, 2020
The jump in agricultural commodity purchases to US$40 billion from the U.S. would be much higher than any previous amount.
This suggests at least $36.5b in 2020 and $43.5 in 2021 of US agricultural goods. More if market conditions are favorable. For comparison, the previous highs were set in 2012-2014 just under $30b (when many ag products were trading much higher prices) https://t.co/6HKA4Uj9Ax
— Ted Seifried (@TheTedSpread) January 15, 2020
Many experts believe that the key piece to the deal is the ability for the U.S. to enforce the promises that China has made. In an interview with Full Measure, the author of The Hundred-Year Marathon Michael Pillsbury stated:
“The most important thing about phase one in my opinion, is to have an enforcement mechanism where the Chinese set up a system that the American side can make complaints. You stole this intellectual property from us on this date, and we lost this much money, please fix it. China’s never agreed to it with any other country in the world. So this will be the breakthrough the president will have achieved. But there’s also something that the president cares a lot about called the trade deficit, that China has a $500 billion trade deficit with us. It’s the biggest one in the world. The Chinese are promising to greatly increase the purchase of American exports.”
Canadian farmers could see benefit to this deal based on “funds getting long the market creating increased Canadian cash prices based on the U.S. futures,” according to Wendy White, of Viterra.
RealAgriculture will have more insight on the impact of this deal on Canadian farmers over the coming days. Read the full text, here.
On Wednesday morning, Shaun Haney appeared on RFDTV to discuss the deal with hosts Christina Loren and John Jenkinson