U.S.-China Phase One Trade Deal: What’s In It for Farmers?

 

China appears to be moving ahead with implementing some of the commitments it made as part of the so-called “phase one” trade deal with the Trump Administration in mid-January. The U.S. Department of Agriculture and U.S. Trade Representative announced on Feb. 25 that China has lifted some restrictions on the import of U.S. poultry, pet food, chipping potatoes, feed additives, and seafood in addition to reducing retaliatory tariff rates for certain U.S. agricultural products.

 

These early sounds of progress could spell good news for U.S. family farmers and ranchers, who have been hit hard by the trade war—though, it may be too soon to celebrate. While the phase one deal put a pause on the escalation of hostilities, it leaves in place the measures that have caused the greatest financial hardship for American farmers and fails to address many of the underlying issues that caused the trade war in the first place. With that said, it does resolve some longstanding non-tariff barriers to U.S. agricultural goods and could deliver a $30 billion-plus increase in exports in the near term—though the spread of the coronavirus is increasingly calling China’s purchasing capacity into question.

 

With all of this in mind, let’s look at what is in the phase one deal and what has happened in the almost two months since it was signed.

 

As a reminder, here’s how we got here: President Trump initiated a trade war in 2018 to curtail what the White House deemed to be unfair trade practices and intellectual property violations on the part of the Chinese government. That kicked off a cycle of retaliatory actions, including new tariffs aimed at U.S. agricultural products that dramatically reduced exports. U.S. farmers and ranchers sold $21.4 billion of goods to China in 2016, the year before the Trump Administration took office, but a mere $13.8 billion in 2019. After months of negotiations, leaders from the United States and China signed the phase one deal on January 15 as the White House promised broader reforms in a second round of negotiations.

 

Most helpful to U.S. farmers and ranchers in the phase one deal, at least in the immediate future, will likely be the changes food safety regulations—some of which are already being implemented. China has announced changes to U.S. meat, poultry, and dairy facility inspections that will ease export requirements. Further, China is lifting bans on U.S. poultry and beef products, clearing the way for exports. A streamlined approval process for biotechnology and GMOs, and reforms to produce safety protocols will help facilitate trade in a range of other commodities.

 

But the benefits to U.S. farmers and ranchers in other portions of the deal are less clear. Notably, both sides will keep many retaliatory tariffs in place, curbing demand for U.S. products in China. While China has begun granting discretionary tariff exemptions on some goods in response to coronavirus, these are not actually part of the deal and could be cancelled at any time.