Sector News

U.S., China sign phase one of trade pact

January 16, 2020
Food & Drink

President Donald Trump and Chinese Vice-Premier Liu He on Jan. 15 signed the Economic and Trade Agreement between the United States and the People’s Republic of China (the much anticipated phase one deal), marking a truce in what had been a steadily escalating trade war.

Among key concessions made by China was its agreement to purchase during the next two years, 2020 and 2021, $200 billion worth of U.S. products and services, including agricultural products, over the value of U.S. exports to China in 2017, the year before the trade war erupted.

“This agreement finally levels the playing field for U.S. agriculture and will be a bonanza for America’s farmers, ranchers and producers,” exclaimed Secretary of Agriculture Sonny Perdue.

The text of the 96-page phase one trade deal affirmed that China has agreed to purchase at least $36.5 billion in U.S. food, agricultural and seafood products in calendar year 2020 and at least $43.5 billion worth in 2021. Those totals reflect annual increases of $12.5 billion in 2021 and $19.5 billion in 2021 from the baseline of $24 billion in U.S. food, agricultural and seafood products that China purchased in 2017. Additionally, the text indicated that at the request of the United States, China “will strive to purchase and import $5 billion per year of agricultural products” in addition to the minimum amounts set forth in the agreement.

There are no agreed levels for Chinese purchases of U.S. food, agricultural and seafood products beyond 2021. Instead, the agreement states: “The Parties project that the trajectory of increases in the amounts of manufactured goods, agricultural goods, energy products, and services, purchased and imported into China from the United States will continue in calendar years 2022 through 2025.”

The agreement also states: “The Parties acknowledge that purchases will be made at market prices based on commercial considerations and that market conditions, particularly in the case of agricultural goods, may dictate the timing of purchases within any given year.”

Notably, the published text of the agreement released publicly provided no breakout of food, agricultural and seafood purchases by product category. This may account for the wide decline in soybean futures in Jan. 15 trading. The market yearns for specificity.

By Jay Sjerven

Source: Food Business News

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