USGC: Phase one trade deal with China promises ag sales

By U.S. Grains Council | January 21, 2020

President Donald Trump and Chinese Vice Premier Liu He signed a “phase one” trade deal Jan. 15 at the White House, an agreement that should pave the way for China to uphold its pledge to purchase up to $80 billion in agricultural goods over the next two years and make structural changes that should provide U.S. grains products improved access to the Chinese market over the long term.

The agreement is set to go into effect on Feb. 14, 30 days after the signing. The deal itself runs more than 90 pages and reportedly also includes confidential sales targets for a full range of U.S. agricultural products, including grains, distillers dried grains with solubles (DDGS) and ethanol.

U.S. Grains Council Chairman Darren Armstrong, a farmer from North Carolina, was among the farmers and others who attended the agreement’s signing.

“The 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 U.S. agricultural products,” he said in a statement released on Wednesday.

“The structural reforms in the agreement—once fully committed and implemented—will hopefully offer lasting impacts beyond short-term commitments to make accelerated, market-driven purchases. 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.”

Despite ongoing trade tensions, the Chinese market holds immense growth potential for U.S. agriculture. China is the second largest corn producer and consumer behind the United States and, in the past, was the world’s largest importer of sorghum and DDGS. These feed ingredients supply the world’s largest swine, aquaculture and egg industries, the second largest poultry industry and growing dairy and beef operations.

In the run up to the event, the Trump Administration also removed China’s formal designation as a currency manipulator since the deal includes commitments from China to upgrade its currency practices and refrain from further competitive devaluation. This and the warm reception at the deal’s signing are considered signs of improved relations between the two countries.

Over the years, the Council has leveraged its capital and expertise to help advance China’s food security, safety and sustainability through trade. It has been at the forefront of helping local producers lead modernization of China’s swine industry, a dairy technical training center and myriad of other trade servicing tasks. In recent years, the Council’s China office has offered technical and logistical input as China seeks to diversify its fuel supply and achieve environmental benefits by blending fuel ethanol.

“Our organization and our members believe in the long-term value of international trade,” Armstrong said. “We have spent more than 35 years working with partners in China to develop its feed and livestock industry. 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.”

The Trump Administration has said there will be a second phase of negotiations, though it may not be concluded until after the presidential election in November.

Find more about the deal agreed to this week here.

Learn more about the Council’s work in China.