China has committed to buy at least $80 billion in U.S. farm products over the next two years and the country also agreed to sweeping structural changes that promise to improve trade on a more permanent basis for U.S. beef, pork, rice, corn, wheat, soybeans and other commodities.
“This agreement tears down major market barriers for U.S. food and agricultural exports,” President Donald Trump said Wednesday before signing the "phase one" trade pact at the White House with Chinese Vice Premier Liu He.
According to the text of the agreement released after the ceremony, China committed to buying $36.5 billion in U.S. farm commodities in 2020 and $43.5 billion in 2021. A footnote says China "will strive to purchase and import" an additional $5 billion per year.
The Trump administration is predicting that the removal of Chinese trade barriers will prompt $300 million in yearly U.S. rice exports and $1 billion in yearly U.S. beef exports to China.
"China has long been on our radar and we believe their growing population and dietary preferences present a great opportunity for our farmers," said USA Rice Federation Chairman Charley Mathews.
Trump said Wednesday that he has no intention on lifting U.S. tariffs on $250 billion worth of Chinese goods, meaning that Chinese retaliatory tariffs will likely stay in place. But a senior White House official told reporters Wednesday after the signing ceremony that China will be granting exclusions to the tariffs, “including automatic exclusions for certain areas in ag market. They are already taking actions through exclusions" to meet purchase commitments. We think they're going to have a need for and a strong demand for these products in the Chinese market.”
After about two years into the trade war that drastically cut U.S. exports to one of its largest destinations, farm groups rejoiced over the trade deal that will go into effect in 30 days.
“With planting season coming up, this agreement has the potential to provide relief for our farmers who have battled through more than a year of market uncertainty,” said U.S. Soybean Export Council CEO Jim Sutter. “The deal includes commitments by China to substantially increase imports of soybeans and our farmers are ready to meet this demand while also maintaining our efforts to deliver U.S. Soy products in other key regions.”
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U.S. cattle ranchers and beef packers will be some of the biggest winners. That’s because China has agreed to lift several major restrictions on U.S. beef, including a prohibition on meat from cattle over 30 months old at the time of slaughter. Also, after years of resisting, China has agreed to lift its ban on beef from cattle treated with growth hormones and accept minimum CODEX residue levels.
China also will relax its traceability standards for U.S. beef. The identification of the slaughterhouse that handled the meat will be sufficient.
"China could easily be a top three market for us in the very near future," said Kent Bacus, director of international trade and market access for the National Cattlemen's Beef Association. From January to November 2019, China only purchased $70 million worth of U.S. beef. USDA estimates that U.S. beef and beef product exports to China could reach $1 billion annually.
But the U.S. Meat Export Federation once estimated that China could be a $4 billion market for American beef, and that is probably a "conservative estimate" now, in part because of the African swine fever epidemic that decimated China's swine production, said Bacus. "We think that there’s tremendous upswing here," he said.
Much of the expected increase in U.S. ag exports to China will come as a result of new Chinese pledges to fulfill the commitments it made on tariff rate quotas when the country joined the World Trade Organization about 20 years ago.
China agreed to a 9.64-million-metric-ton quota for wheat, a 7.2-million-metric-ton quota for corn, a 2.66-million-metric-ton quota for long grain rice and a 2.66-million-metric-ton quota for short and medium grain rice when it joined the WTO, but it has only imported a fraction of that.
The U.S. sued China at the WTO for not filling the quotas and won that case. China agreed not to appeal and provisions in the new "phase one" deal are aimed at making sure China does not renege.
China has agreed to:
- Not discriminate between state trading enterprises and non-state trading enterprises; Reallocate unused or returned TRQ amounts;
- Ensure that allocations are made in commercially viable shipping amounts;
- Enhance transparency of the eligibility criteria and allocation principles;
- Ensure there is a sufficient number of state trading enterprises and non-state trading enterprises eligible to receive allocations and that full utilization of the TRQs is not inhibited;
- Provide relevant allocation and reallocation information upon request of the United States; and
- Make public on a website existing laws, regulations and announcements on the administration of the TRQs.
National Grain and Feed Association Chairman Eric Wilkey stressed that “early indications are that the Phase One agreement will help begin the process of restoring U.S. - China agricultural trade volumes and effectively address several existing trade impediments for specific agricultural products.”
Another major commitment from China that will improve trade conditions for a broad swathe of U.S. agriculture is its promise to restructure the way it approves new biotechnology traits.
“China has agreed to implement a transparent, predictable, efficient, science- and risk-based regulatory process for the evaluation and authorization of products of agricultural biotechnology,” the White House said Wednesday. If China follows through, it will be a major change from the opaque system that can snarl the approval process for five years or even longer, preventing traits from being commercialized out of fear of Chinese rejections.
China agreed to cut out the requirement for “information unnecessary for assessing the safety of the product for its intended use” and committed to an approval process that will only take about 24 months.
“We are currently reviewing the details, but we are pleased to see important commitments for agricultural biotechnology, biopharmaceuticals, and GM microorganisms, in addition to commitments related to forced technology transfer and intellectual property,” said Jim Greenwood, CEO of the Biotechnology Innovation Organization. “Our trade relationship with China is vital for America’s farmers, our scientists and our entrepreneurs.”
Steve Davies contributed to this report.
