Rabobank Examines Phase 1 Trade Deal
Purchase target will require more than just G&O trading
The US and China signed the Phase 1 trade and investment agreement on January 15. The agreement includes a sharp increase in sales of US goods and services to China, stricter intellectual property right protections, wider market access to China’s financial market, etc.
All of these provisions are subject to an enforcement mechanism. In the agreement, China pledged to buy an additional USD 200 billion of US goods across 2020 and 2021, above the level in 2017.
For US agricultural products, the agreement states that China will buy an extra USD 32 billion over the two-year period, on top of 2017’s USD 24bn of trade value.
China also agreed to increase market access for US products such as dairy, poultry, beef, seafood, paddy rice, fruit, feed, and pet food.
To achieve the purchasing targets, China will have to increase imports of US agricultural products.
Rabobank projects that China’s potential procurement of key US agricultural products, such as grains, oilseeds, pork, beef, poultry and seafood, should contribute to the majority of the target purchases.
Other agricultural products are also discussed, such as dairy and cotton.
These projections serve to provide Rabobank’s view on this rapidly evolving development and are based on the information at hand, which will change over the year. Rabobank will endeavour to update the scenarios as new information surfaces.
Read the full report here.