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China phase one deal under review

Jacqui Fatka

February 3, 2021

The Biden administration will review all national security measures put in place by former President Donald Trump, including the U.S.-China phase one trade deal signed January 2020, White House Press Secretary Jen Psaki made in comments Friday.

Asked if President Joe Biden viewed the deal as still in effect, she told a White House briefing: “Everything that the past administration has put in place is under review, as it relates to our national security approach, so I would not assume things are moving forward.”

Psaki says the Biden administration was focused on approaching the U.S.-China relationship “from a position of strength, and that means coordinating and communicating with our allies and partners about how we’re going to work with China.”

Trump signed the phase one trade agreement with Chinese President Xi Jinping in January 2020, easing a nearly 18-month trade war in which U.S. and Chinese goods worth hundreds of billions of dollars were hit by tit-for-tat tariffs, slowing trade between the world’s two largest economies

According to the latest data for from the Peterson Institute for International Economics, for covered agricultural products, China committed to an additional $12.5 billion of purchases in 2020 above 2017 levels, implying an annual target of $36.6 billion (Chinese imports, panel b) and $33.4 billion (US exports, panel c). Through December 2020, China's imports of covered agricultural products were $23.5 billion.

Over the same period, US exports to China of covered agricultural products were only $27.3 billion. In the first year of the agreement, China's purchases of covered agricultural products only reached 82% (US exports) or 64% (Chinese imports) of their target.

Mary Kay Thatcher, Syngenta senior lead of federal government relations, says although China fell short of reaching its promised levels, it was still the highest level seen for ag exports for the marketing year. “We have a lot of work to do,” Thatcher says of getting China to purchase the additional amounts in 2021 to make up the shortfall.

In 2020, China bought a record 11.3 million tons of corn and 8.38 million tons of wheat. It also returned to higher amounts of soybean purchases and purchased 25.89 million tons compared to 16.94 in 2019.

Ben Brown, University of Missouri agricultural economist, says China’s relaxation on tariffs on distillers grains and ethanol always was seen as a precursor signal if China was committed to its phase one commitments. “I expected them to bring down ethanol and DDGS tariffs, and that hasn’t happened,” Brown says. Promising movements did come with reports ADM confirmed the sale of 200 million gallons of ethanol to China and another 300 million bushels of corn in a recent week of sales.

“Those phase one targets get higher this year,” Brown says, creating a tall task of not only beating the 2020 record totals but increasing to reach a combined two-year level of $50 billion.

Measured approach

Thatcher uses a football analogy to compare the Trump and Biden approaches to trade. She sees former President Donald Trump as one who threw long passes, whereas Biden is more measured in short passes that can still accomplish a touchdown.

“He’s been clear trade and new trade agreements are not going to be the first things out of the box,” Thatcher says of Biden’s trade approach. He may focus on enforcement rather than new trade agreements. “I think that concerns people. I anticipate he is going to have some tough times with China.”

Thatcher says she thinks Biden does want to remove some of the tariffs, especially because current tariffs continue to make U.S. products less competitive. Biden likely will try to spend some time on what he can negotiate in return for lowering tariffs, as well as trying to bring in environmental and labor provisions.

Ian Sheldon, Ohio State University trade policy economist, says China is now involved in setting the rules of trade and the U.S. is not in the China-led Regional Comprehensive Economic Partnership with 14 other countries in the Asia-Pacific region. Sheldon says he believes the U.S. needs to revisit rejoining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the predecessor for the TPP that Trump withdraw from in his first days of office.



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