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Industry Reacts to Phase 1 Trade Deal Signing

NGFA: Significant first step in resolving disruptions, festering impediments between world’s two largest economies

Port_container_cargo_exports_VIA PIXABAY_Feb 2021

President Trump on Wednesday signed an initial trade deal with China that includes pledges from Beijing to more than double its purchases from American farmers in the first year, reports CNN.

The 86-page agreement comes after nearly two years of fraught negotiations and a punishing trade war between the world's two largest economies that hit US soybean producers especially hard.

Under the agreement, China has promised to buy an additional $12.5 billion in US agricultural products in year one, and then $19.5 billion year two. Those commitments come atop roughly $24 billion in farm purchases that China made in 2017, before the trade war started.

Farm Bureau President Zippy Duvall called the agreement an "important step."

"China was once the largest market for US agricultural products but has dropped to fifth largest since retaliatory tariffs were introduced. This agreement will help turn around two years of declining agricultural exports," he said in statement.

Grain Industry

The National Grain and Feed Association (NGFA) Chairman Eric Wilkey, president of Arizona Grain Inc., Casa Grande, AZ, was among agricultural industry leaders attending the signing ceremony at the White House.

NGFA says the trade agreement represents a significant first step in resolving disruptions and long-standing, festering impediments involving trade between the world’s two largest economies, and contains substantial commitments from China to purchase US food, agricultural and seafood products. It also is significant that the agreement contains Chinese commitments to abide by science- and risk-based processes with transparency and specific timelines for regulatory actions related to agricultural biotechnology, animal food, and meat and poultry products.

“NGFA looks forward to delving into the details of the agreement and its application to US agricultural exports, and will have additional comments and analysis once doing so," says Wilkey. "But early indications are that the Phase One agreement will help begin the process of restoring US-China agricultural trade volumes and effectively address several existing trade impediments for specific agricultural products."

NGFA believes more negotiations need to occur to resolve particularly non-tariff barriers to trade, including sanitary and phytosanitary issues, affecting grain and grain products, that too frequently and unpredictably disrupt US agricultural trade with China.

"NGFA also seeks to restore competitive open market agricultural trade and a level playing field with China," says Wilkey.

Feed Industry

According to the American Feed Industry Association (AFIA), the US animal food manufacturing industry faces a number of challenges in this market, including those which have restricted any new US feed additive and premix products to be exported to China since 2011 and those which restrict US feed products with ruminant-origin ingredients and a number of poultry-derived ingredients.

This agreement directly addresses these constraints by streamlining and facilitating a facility registration process for feed additives, premixes and compound feed, as well as lifting the poultry and ruminant ban for animal food products.

"Addressing the non-tariff barriers that challenge our industry in the Chinese market has been a top priority for AFIA for nearly a decade," says AFIA’s President and CEO Constance Cullman. "I am very excited about what this agreement means for the US animal food industry and reopening the Chinese market for our products."

Tim Belstra, AFIA's chairman, represented AFIA and its members at the signing.

"This is a landmark opportunity not only for the US animal food industry, but also for the livestock and poultry industries in China to further expand their feed ingredient inputs and technology," he says.

USGC Weighs In

The U.S. Grains Council (USGC) believes Phase 1 should reduce continued market uncertainty and incentivize China to purchase significant amounts of the full range of US agricultural products, including grains, distiller's dried grains with solubles (DDGS) and ethanol, to total at least $80 billion over the next two years.

"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," say USGC Chairman Darren Armstrong, a farmer from North Carolina. "The agreement, as we understand it, will offer opportunities for US farmers to once again become competitive in China and serve our customers by addressing retaliatory tariffs and long-standing, non-tariff barriers to trade.

"USGC 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," he continues. "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."

Wheat Producers' POV

Chinese imports of US soft white (SW), hard red spring (HRS) and hard red winter (HRW) wheat classes were trending up before abruptly ending when China implemented retaliatory tariffs on US wheat and other agricultural commodities in March 2018.

“Even though China has huge domestic wheat stocks, they were buying more US wheat because they needed it to meet growing demand for higher quality wheat foods,” says Vince Peterson, president of U.S. Wheat Associates (USW), the organization funded by farmers and the US government to promote wheat exports. “The losses we demonstrated soon after China stopped importing US wheat have only grown since then, so we hope the agreement signed today signals a potential turn-around."

Adding to the optimism is China’s separate agreement to work toward filling its 9.6 million metric ton (MMT) reduced tariff rate quota (TRQ) for wheat imports. If the changes are in fact implemented, and Chinese millers can respond to market signals, most of the TRQ should be used. For US wheat farmers, the Phase One deal and TRQ compliance would create a very welcome opportunity for Chinese miller customers to once again apply the technical expertise and assistance USW provides to use wheat with specialized end-use applications that distinguishes US wheat from domestic Chinese supplies.

"Wheat farmers have experienced the harm of unfair trading practices at the hands of China for far too long, as reinforced by the recent WTO wins. This step forward in negotiations between the US and China is a tremendous way to begin the new year," says NAWG CEO Chandler Goule. "As part of its Winter Conference this week, NAWG and its states will hold several meetings on The Hill where it will be stressed to Members and staff the need to continue expanding our international markets, including to swiftly move forward with Phase One of US-China trade deal."

Re-opening China would be a huge lift for wheat farmers. USW and NAWG are especially pleased that the agreement contains structural changes to how US. exporters access the Chinese market.

US negotiators should be commended for seeing the opportunity to build on our wins at the WTO against China’s TRQ administration and agricultural subsidy policies by including provisions on administration and transparency of policies.

The additional commitments included in the agreement contain important transparency measures, such as reporting on TRQ awards and operation of subsidy programs in addition to reaffirming commitments on eligibility for access to TRQ.

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