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Phase 1 trade pact a boon to U.S. farmers if China follows through
Gazette staff and wires
Jan. 15, 2020 6:58 pm
WASHINGTON - The United States and China reached a trade deal Wednesday that eases tensions between the world's two biggest economies, offers massive export opportunities for U.S. farms and factories and promises to do more to protect American trade secrets.
Still, the Phase 1 agreement leaves unresolved Washington's fundamental differences with Beijing, which is relying on massive government intervention to turn China into a technological powerhouse.
President Donald Trump wants to show progress on an issue he has made a hallmark of his presidency and hopes to use in his reelection campaign. Wednesday's signing ceremony gave him the chance to do that, just hours before the House voted to send articles of impeachment to the Senate for a trial.
Trump promoted the trade signing as a way of delivering economic justice for American workers he said were betrayed by past administrations and their trade policies.
'We mark more than just an agreement. We mark a sea change in international trade,” Trump declared.
Chinese leader Xi Jinping said in a letter to Trump that the first-phase deal was 'good for China, for the U.S. and for the whole world.” He said it also showed the two countries had the ability to 'act on the basis of equality and mutual respect.” The letter was read by Beijing's chief negotiator, Vice Premier Liu He.
Many supporters of the deal praised it, but quickly added they'd be watching to see if China lives up to its promises.
'At the White House today, I was thinking of my neighbors in Iowa and all the other farmers across the country who have stood strong throughout this process,” said a statement from Sen. Chuck Grassley, R-Iowa, who attended the ceremony. 'I hope this proves to be a turning point in our economic relationship with China, but I've seen enough history to be clear-eyed. Not only must China follow through with its commitments in this Phase One deal, but also work toward a comprehensive agreement that ends forced technology transfers, intellectual property theft and unfair restrictions on U.S. goods, including agriculture.”
Despite the initial deal, the Iowa Soybean Association said plans remain to try to develop other markets overseas.
The agreement is 'just the first step on a long journey to restoring nearly two years of lost sales to the world's No. 1 soybean buyer,” said association President Tim Bardole. 'America is now a residual - rather than primary - supplier to a country of 1.4 billion people.”
Some of the president's Democratic critics were unimpressed.
'True to form, Trump is getting precious little in return for the significant pain and uncertainty he has imposed on our economy, farmers, and workers,” said former Vice President Joe Biden, one of those hoping to replace Trump in this year's election.
Because of the trade wars, the Trump administration gave $14.5 billion in direct payments by the end of last year to agriculture producers, most of them soybean and corn farmers.
The administration acknowledged the agreement leaves unresolved some U.S. complaints - most notably, the way the Chinese government subsidizes its companies.
That was a concern voiced when Trump sparked a trade war by imposing tariffs on Chinese imports in 2018.
'The Phase 1 deal contains meaningful commitments but by no means lives up to the initial objectives of the administration,” said Wendy Cutler, a former U.S. trade negotiator who is now vice president at the Asia Society Policy Institute.
The deal leaves in place tariffs on about $360 billion in Chinese imports, leverage the administration hopes will bring more concessions.
U.S. Trade Rep. Robert Lighthizer said work on follow-up negotiations will hinge on how China fulfills these commitments.
China is required to increase its purchases of U.S. manufactured, energy and farm products and services by a combined $200 billion this year and next.
The deal calls for China to buy $36.5 billion this year and $43.5 billion next year in U.S. farm exports. That would be a windfall for Trump supporters in rural America, but an ambitious goal considering China has never bought more than $26 billion in U.S. agricultural goods in a year.
'It's a strong first step,” said Jeremie Waterman, the U.S. Chamber of Commerce's vice president for Greater China. 'It begins the process of addressing some of the structural concerns, but there's a lot of work left to do.”
Derek Scissors, China specialist at the American Enterprise Institute, said the trade war already has delivered a benefit for Trump, even if it hasn't forced Beijing to make major changes to its economic policy.
Trump's tariffs have reduced Chinese exports to the United States and narrowed America's trade deficit with China.
So far this year, the U.S. deficit with China in the trade of goods has declined by 16 percent to $321 billion compared with a year earlier. The deficit will narrow more if Beijing lives up to its pledges to buy so much more American imports.
Summary: What it means for agriculture
The deal calls for China to buy far more ag products from the United States in 2020 and 2021 than it ever had before annually. The high point of U.S. ag sales to China was nearly $26 billion in 2012. However, an official in China said this week its 2018 ag imports worldwide were over $137 billion.
China agreed to:
' Reestablish a baseline of $24 billion in U.S. ag imports in 2020 and 2021.
' Buy an additional $12.5 billion in 2020, for a total of $36.5 billion; and $19.5 billion above baseline in 2021, for a total of $43.5 billion in 2021.
' 'Strive to purchase” another $5 billion in each of the two years.
The agreement broadly defines agriculture goods as oilseeds such as soybeans, meats, cereals, cotton, seafood and 'other.” The deal does not say what happens after two years.
The Associated Press and Kristin Guess of the Waterloo-Cedar Falls Courier contributed to this report.