Trump signs phase one trade agreement with China

By Erin Voegele | January 15, 2020

President Trump signed a phase one trade agreement with China on Jan. 15. The agreement will take effect within 30 days and includes a commitment by China to purchase agricultural products over the next two years, including ethanol and distillers grains.

A statement released by the White House indicates that China has pledged to increase imports of American goods and services by at least $200 billion over the next two years. As part of the deal, China has agreed to purchase between $40 and $50 billion in American agriculture goods each year for two years.

Fact sheets released by the USDA show that the agreement will also provide U.S. manufactures of distillers dried grains with solubles (DDGS) with a streamlined progress for registration and licensing in order to facilitate U.S. exports to China.

The U.S. Grains Council issued a statement in support of the trade deal.  “The U.S. Grains Council is pleased to see the signing today of a phase one deal with China, which should reduce continued market uncertainty and incentivize China to purchase significant amounts of the full range of U.S. agricultural products, including grains, distiller’s dried grains with solubles (DDGS) and ethanol, to total at least $80 billion over the next two years,” said Darren Armstrong, chairman of the USGC.

“The structural reforms, particularly those affecting feed grains, agricultural biotechnology, and sanitary and phytosanitary measures—once fully committed and implemented—will hopefully offer lasting impacts beyond short-term commitments to make accelerated, market-driven purchases,” he continued. “The agreement, as we understand it, will offer opportunities for U.S. farmers to once again become competitive in China and serve our customers by addressing retaliatory tariffs and long-standing, non-tariff barriers to trade.

“Our organization and our members believe in the long-term value of international trade, and we have spent more than 35 years working with partners in China to develop its feed and livestock industry,” Armstrong said. “Our sector is committed to remaining a reliable supplier of grain products and ethanol for customers in the feed, food and energy industries in China as our countries’ relationships evolve.”

Representatives of the U.S. ethanol industry have also weighed in on the deal.

The American Coalition for Ethanol called the agreement a step forward, but cautioned that significant ethanol market constraints remain. “Phase one represents a positive step in the right direction, especially once we have evidence that China has made actual purchases of U.S. ethanol and distillers grains, but given ongoing export and domestic market constraints, there is much more work to do,” said Brian Jennings, CEO of ACE.

“The signing of this partial trade deal with China doesn’t erase the pain still being felt at home due to the artificial lid EPA’s mismanagement of the Renewable Fuel Standard has placed on domestic ethanol demand,” Jennings continued. “Further, today’s trade agreement follows reports that China suspended its plan to implement an E10 nationwide mandate this year, raising more uncertainty for the industry. We remain hopeful the next phase of talks with China can conclude with the restoration of a robust and enforceable trade relationship.”

The Renewable Fuels Association hailed news of the agreement. “We are very optimistic about the potential of this agreement for American agriculture and the renewable fuels industry—with the inclusion of ethanol and key co-products like distillers grains—and are looking forward to more specific details on the agreement,” said Geoff Cooper, president and CEO of the RFA. “America’s ethanol producers have experienced significant economic losses due to punitive Chinese tariffs on our products, and we are eager to return to a more open trading relationship with China. Chinese consumers understand that using ethanol can lower fuel prices and help address major air quality concerns in urban areas across the country. In addition, the ethanol industry’s animal feed co-products are an economical source of nutrition for China’s livestock and poultry sector.

“We hope this deal reopens the door immediately for meaningful exports of both ethanol and feed co-products to China, and we thank President Trump, the U.S. Trade Representative, and U.S. Department of Agriculture for their efforts to reopen the Chinese market to U.S. agricultural and energy products,” Cooper continued. “And like President Trump in his remarks right before the signing, we also appreciate the hard work of Sens. Chuck Grassley, Joni Ernst and Deb Fischer as true champions for ethanol.”

Growth Energy called the agreement a positive step forward. “The signing of the Phase One trade agreement with China today is another positive step towards restoring market confidence for U.S. biofuel producers,” said Emily Skor, CEO of Growth Energy. “We’re grateful to U.S administration officials for their continued work on securing this trade agreement at such a pivotal time for our nation’s agriculture and renewable energy industries. Breaking down trade barriers between our nations will provide a valuable opportunity to restore demand for American biofuel, and we hope to soon see biofuels and DDG exports back on the Chinese market.”