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NPPC pushing for pork, but U.S. China trade talks have a long way to go

On Wednesday begin the first cabinet-level trade talks between the United States and China since leaders of the two nations agreed in December to a 3-month halt (until March 1) on escalating tariffs. 

With China reportedly willing to buy more U.S. goods, the National Pork Producers Council on Tuesday urged negotiators to seek a minimum $3.5 billion purchase of U.S. pork over the next five years.

“China has been a tremendous market for U.S. pork and, absent numerous trade barriers, probably would be our No. 1 export market,” said NPPC President Jim Heimerl, a pork producer from Ohio. “But, never mind China’s preexisting barriers on U.S. pork, the 50 percent punitive tariffs on U.S. pork have slowed our exports to a trickle. We call on the Chinese to begin immediate purchases of U.S. pork of at least 350,000 tons each year from the United States for the next five years.”

Bloomberg earlier this month quoted unnamed sources saying China has offered to increase its purchases of U.S. products by $1 trillion over a six-year period.

Easier said than done

U.S. officials, however, warned this week that structural trade issues must be resolved and those won’t be fixed alone by China increasing U.S. purchases.   

In an interview with CNBC’s Squawk Box, Commerce Secretary Wilbur Ross said, “[W]e are miles and miles from getting a resolution…there are lots and lots of issues… not just how many soybeans and how much [liquid natural gas], but even more importantly, structural reforms that we really think are needed in the Chinese economy … enforcement mechanisms and penalties for failure to adhere to whatever we agree to.”

Chinese Vice-Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead this week’s trade talks.

Pork’s lament

U.S. pork producers now face tariffs of 62 percent on exports to China, which in early April 2018 imposed a 25 percent tariff in response to U.S. tariffs on Chinese steel and aluminum and in June added another 25 percent duty in retaliation for the U.S. tariffs levied on a host of Chinese goods because of China’s treatment of U.S. intellectual property and forced transfers of American technology. China already had a 12 percent tariff on U.S. pork, and the country has a 13 percent value-added tax on most agricultural imports.

Iowa State University economist Dermot Hayes calculates that because of the 50 percent punitive tariffs, U.S. pork producers have lost $8 per hog, or more than $1 billion on an annualized basis. Hayes says that if China purchases at least 350,000 tons of U.S. pork each year for five years, the total deal would be worth approximately $3.5 billion in sales.

The timing for more pork purchased might be good, Hayes notes, as China needs to import more pork to mitigate the impact of African Swine Fever on the Chinese pig herd.

Source : Meatingplace