It was all smiles in Washington D.C. January 15 when the President Trumped inked a Phase 1 trade deal with China. Looking on were dozens of Wall Street chief executive types from familiar companies like AGI, JP Morgan Chase, Honeywell, Boeing, and Citibank. As for Big Ag types … not so much.
The POTUS trade war with China took a huge toll on U.S. farmers. U.S. agricultural sales to China were down nearly $16 billion over the past two years requiring the White House to provide $28 billion in government bailouts to U.S. producers, notably soybean farmers.
So on the face of it you would think producers would be jumping for joy over Phase 1 trade deal provisions including:
“For the category of agricultural goods identified in Annex 6.1, no less than $12.5 billion above the corresponding 2017 baseline amount is purchased and imported into China from the United States in calendar year 2020, and no less than $19.5 billion above the corresponding 2017 baseline amount is purchased and imported into China from the United States in calendar year 2021;
The Parties project that the trajectory of increases in the amounts of manufactured goods, agricultural goods, energy products, and services purchased and imported into China from the United States will continue in calendar years 2022 through 2025.”
So do the math. That's $32 billion in new agricultural purchases over 2017 baseline levels during the next two years. U.S. agricultural exports to China in 2017 were $19.6 billion. Bottom line: China will import $32.1 billion this year and $39.1 billion in 2021 from U.S. farmers.
Those are heart pumping, fist bumping, joy jumping POTUS trumping numbers, right? But the ink had not even dried on the President's John Henry when reality reared its ugly head.
The South China Morning Post reported the day before the signing that China had zero intention of increasing its annual low-tariff import quotas for corn, wheat and rice to meet demands from the United States. Zero intentions.
Essentially that means that U.S. soybean sales to China will need to be ratcheted up to historical levels to have any chance of meeting Phase 1 export goals. But that's just not going to happen for a couple of reasons.
In 2020, China’s incentive to increase U.S. soybean imports to a large degree hinges on its effort to contain swine fever and rebuild the nation's decimated herd.
So if not U.S. soybeans how about U.S. pork? China needs pork right? U.S. pork exports to China and Hong Kong over the first eleven months of 2019 were up 49 percent worth $1.18 billion. So is there room for significantly more U.S. pork exports especially given the Phase 1 trade deal hasn't put a dent in China import duties of 68 percent? That remains to be seen.
And if that isn't enough, China's Vice Premier Liu He, standing beside the POTUS during the signing said that Chinese firms will purchase American products, including ag presumbly "based on market conditions."
Market conditions. In other words, if U.S. ag products are cheaper that those available in other countries let the wheeling and dealing commence. If not...well maybe those Phase 1 import trade promises are not worth very much.
Well respected foreign ag analyst Mary Kay Thatcher agrees. Thatcher who worked for the American Farm Bureau Federation for three decades before taking charge of Syngenta's federal government relations put it rather bluntly: “ We were told that we would see $40 billion a year in fresh ag purchases, but I haven’t seen any of these numbers out of China and I don’t think any farmer here considers that number to be realistic.”
And something else. I suspect that the White House could have had something similar to Phase 1 way back in 2018 without imposing hundreds of million dollars in tariffs on China.White House chief trade negotiator Robert E. Lighthizer said “the agreement will work if China wants it to work.”
Here's betting the U.S. will get less than it signed for.
About Dave Dickey
Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for the Midwest Center covers agriculture and related issues including politics, government, environment and labor. His opinions are his own and do not reflect the Midwest Center for Investigative Reporting. Email him at firstname.lastname@example.org.