U.S., China take first step to trade deal10/17/2019 | Soybean Exports, Policy, Economics
By Bethany Baratta, ISA senior writer
A verbal agreement between U.S. President Donald Trump and Chinese Vice Premier Liu He last week is a welcome first step in restoring trade between the two countries. Farmers and leaders say they are hopeful the deal will get done.
“We are cautiously optimistic this latest announcement of a breakthrough in negotiations will result in a comprehensive trade agreement,” said Tim Bardole, president of the Iowa Soybean Association (ISA).
In the partial agreement, China agreed to buy up to $50 billion more in American agricultural products. It’s been reported negotiations are ongoing regarding technology transfers and opening up China’s financial services market.
As part of the initial agreement, the White House agreed not to proceed with plans to increase tariffs on $250 billion in Chinese goods to 30% from 25%.
The partial agreement comes after 18 months of a trade impasse which has decimated soybean demand and prices.
“With the loss of our Chinese market it had serious ramifications through the countryside,” said Brian Kemp, American Soybean Association board member from Sibley. “Prices and profits have dropped, and that’s created a ripple-effect into our communities.”
The $50 billion increase in purchases of U.S. ag products is said to be split between two years. If so, that could help restore some of the market lost due to the trade war, but it likely won’t fully restore trade with China, said ISA Director of Market Development Grant Kimberley.
U.S. exports of soybeans, pork and other agricultural products peaked in 2013 around $29 billion, falling to $24 billion in 2017 before trade went sour with China. Those same exports plunged to $9.2 billion over the past 12 months, according to Commerce Department data.
U.S. soybean exports to China fell from 36.1 million metric tons in the 2016-17 marketing year to 28.2 million metric tons in 2017-2018, according to USDA market data. However, exports to China fell by 53% or 546 million bushels from prior-year levels. U.S. soybean exports to China during the 2018-2019 marketing year, at 13.3 million metric tons, were the lowest since the 2006-2007 marketing year.
Kimberley said the partial agreement is a good first step. He hopes more can be negotiated that would benefit U.S. farmers.
“I’m hoping to see more transparency into China’s approval and regulatory processes so they can’t arbitrarily slap on barriers and restrict trade from the United States,” Kimberley said.
The progress is reported to be “Phase One” in a larger trade deal, President Trump said. Bardole is ready to restore more normal trade levels with the U.S. soybean industry’s largest trading partner.
“Knowing that we’ll have improved market opportunities for the soybeans we’re harvesting is good for morale and prices,” Bardole said. “Now, let’s follow through and get an agreement inked.”
ISA Public Affairs Director Michael Dolch contributed to this story.
Contact Bethany Baratta at firstname.lastname@example.org.
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