Many continue to question whether China can meet its commitment to purchase at least $36.5 billion in agricultural products by the end of the year. U.S. chief agricultural negotiator Gregg Doud said it’s important, from his perspective, to provide some time and breath to accomplish” this.
While speaking at a virtual conference hosted by the U.S. Soybean Export Council, Doud said it often takes years to see results from trade negotiations. Several actions are finally moving ahead, with China making purchases as well as the U.S.-Mexico-Canada Agreement (USMCA) going into force.
“We’ve gone many years in agriculture without anything on the horizon. It’s still going to take some time for all of this to kick in, but I think we’re already starting to see some fruits of our labor,” Doud said.
He said it’s important to look at China’s overall growth in agricultural imports. China imported $124 billion from the world in 2018, followed by $133 billion in 2019; it is on pace for $141 billion in 2020 -- the same amount as total U.S. agricultural exports to the world. When looking at China's Phase One commitment from the 2017 base year of $24 billion to $36.5 billion, Doud said it’s “not that hard to do.”
Doud said structural changes actually are a significant advancement not discussed often. The original agreement called for 57 structural changes, and Doud estimates that China has completed 50 of those. Outstanding issues pertain to the use of ractopamine and biotechnology.
Another issue the U.S. has struggled with for a long time is the number of facilities approved by the Chinese government. Before the Phase One agreement entered into force, only 1,500 U.S. facilities were eligible to export to China. To date, that has now increased to 3,500 eligible facilities.
Actual trade to China has been down in many categories, but the country has made some recent purchases of U.S. corn, soybeans and sorghum to offer optimism. U.S. soybean exports worldwide were down 21%. Interestingly, U.S. soybean exports to China were down 54%, but soybean exports to other locations were exactly the same as a year ago, Doud said. Recent soybean sales show that it could be a busy fall shipping soybeans to China, he added.
Pork exports to China are already at an all-time record, with as much sent in the first six months as all of last year. Doud said there has been “significant progress on the meat side of the equation” in trade with China.
The U.S. and China said they are seeing progress in the implementation of the Phase One trade agreement. During a six-month review call held Aug. 24, senior officials from both countries reaffirmed commitments to ensuring the agreement’s success.
Doud said even if China's purchase commitments are not met, the two countries will continue the dialogue and discussions. “China indicated they intend their very best to do this,” Doud said, and as recent weeks have shown, it “isn’t just rhetoric; they are making purchases. Hopefully, with this pace, they are able to sustain” the purchase levels.
According to a statement from the U.S. Trade Representative, the parties discussed “significant increases in purchases of U.S. products by China as well as future actions needed to implement the agreement.” Also addressed were the steps China has taken to ensure greater protection for intellectual property rights, remove impediments to American companies in the areas of financial services and agriculture and eliminate forced technology transfer.
Doud said he is watching the implementation of USMCA -- particularly the situation with dairy in Canada -- very closely. Another important focus will be the biotechnology situation with Mexico.
Two important issues included in the new North American deal were the biotechnology component to harmonize approvals and the enforcement mechanism. Doud said the new enforcement mechanism is something he believes the U.S. will really be able to utilize -- and “utilize in a fashion much more quickly than we had previously been able to use.”
He added, “We will not hesitate to use enforcement tools we have in USMCA, if necessary.”
A bipartisan group of 25 senators sent a letter to the U.S. Department of Agriculture secretary and the USTR ambassador identifying challenges with implementing several dairy-related provisions in USMCA. Underscoring USMCA’s importance to the dairy industry, the letter asks the U.S. government to use the enforcement measures to ensure members' full compliance with the trade agreement.
After outlining the dairy provisions, the letter adds, “Given the importance of these provisions to our dairy farmers and to American dairy exports, we ask that you use USMCA’s enforcement measures, as appropriate, to hold our trading partners accountable to their trade commitments. It is imperative that Canada and Mexico deliver upon their agreed-upon commitments related to dairy products.”
Tom Vilsack, president and chief executive officer of the U.S. Dairy Export Council, said, “Canada has already begun implementing USMCA in a way that thwarts its market access promises and prevents U.S. dairy from making full use of the benefits that Congress and the Administration fought so hard to secure. There are also unanswered questions concerning how Mexico will translate its commitments to safeguard common-name cheeses into action. These are unresolved concerns that affect everyday dairy farmers and workers across our industry.”
Other trade advancements
Doud also said there are several singles and doubles around in the world when it comes to agricultural trade advancements. Particularly on the dairy side, progress has been made in Asia and Southeast Asia, including Indonesia.
He said a Phase One deal with Japan brings more than 90% of U.S. agricultural products on an equivalent standing -- something that would have been realized if the U.S. had remained in the Trans-Pacific Partnership -- and specifically offers a boost for beef, pork and wheat producers.
Meanwhile, trade negotiations with the U.K. could turn the currently 16th-largest export market for U.S. producers into a top 10 market, with specific interest for beef, pork and poultry.
Doud noted that a trade agreement with Kenya offers an entry point into Africa. “For agriculture, it really is a unique situation to engage on biotechnology and really build an opportunity for agriculture that we haven’t had in the past,” he said.