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First phase of US-China trade deal signed

Time: 2020-1-15

ON JANUARY 15, 2020

First phase of US-China trade deal signed

Under agreement, $40 billion to $50 billion in US agricultural goods would be purchased annually

U.S. President Donald Trump and Vice Premier Liu He of the Republic of China signed the first phase of the U.S.-China trade deal, which the Trump administration touts as a huge boost for American agriculture.

Trump and U.S. Vice President Mike Pence highlighted the importance of the first phase of the trade deal to the U.S. agriculture industry.

“The greatest impact may well be on American agriculture,” Pence said. “Some $40 billion to $50 billion in purchases secured in this deal will result in greater prosperity for farmers all across the land."

Trump focused more on the prospect of a $50 billion annual benefit to American farmers.

Trump noted that China had previously been doing $16 billion worth of business annually to benefit American agriculture, but “they stopped.” Trump said “our people” pitched to him an idea to secure $20 billion annually in the negotiations. He wanted better.

When Trump said he wanted to aim for $50 billion in purchases of U.S. agricultural goods, he was met with skepticism.

“They said, ‘Sir, our farmers can’t produce that much.’” Trump said. “I said, ‘I love our farmers. Let them tell me they can’t do it.’ … I have no doubt they’ll be able to do it.”

Speaking with the help of an interpreter, Liu He promised China would purchase a minimum of $40 billion annually, with the potential of that figure being even higher.

“As the living standard of Chinese people rises, we will import fine quality agricultural products from countries across the world,” He said. “As the two sides have agreed, based on the market demand in China, in line with market terms, Chinese businesses will purchase $40 billion worth of agricultural products annually. If the demand is strong, the companies may buy more. To make it happen, the two governments need to foster a strong market environment for businesses to expand business activities.”

While specifics regarding which agricultural commodities would be purchased the most under the deal were not mentioned, Trump rattled off a long list of goods that are likely to be purchased by China.

“This agreement tears down major market barriers for U.S. food and agricultural exports. China will now welcome American beef and pork, poultry, seafood, rice, dairy, infant formula, animal feed, biotechnology and much, much more,” Trump said.
Vice Premier He added: “This is a mutually beneficial and win-win agreement that will bring about stable economic growth, promote world peace and prosperity and is in the interest of the producers, consumers and investors in both countries.” He also said it would be “in line with” World Trade Organization rules.

The deal is expected to take effect on February 3.

Second phase coming soon

Both parties stated the second phase of the agreement would be forthcoming.

“As soon as this kicks in, we will be starting phase two,” Trump said.

For the time being, some tariffs will remain after the first phase is implemented, but he said they are merely being left in place because the U.S. would have “no cards to negotiate if they are removed.”

Trump vowed to remove those remaining tariffs if a successful phase two agreement is reached.

While at the ceremony, Trump praised the work of numerous members of his cabinet he deemed essential to reaching the trade deal, including U.S. Trade Representative Robert Lighthizer, Secretary of Agriculture Sonny Perdue, Treasury Secretary Steven Mnuchin and U.S. Ambassador to China Terry Branstad. Trump also gave recognition to a number of Republican U.S. senators, including agriculture committee members Sens. Pat Roberts, Chuck Grassley, Joni Ernst and Deb Fischer as well as Senate Chicken Caucus member Lindsey Graham.

Reactions from agriculture groups

Farmers for Free Trade (FFT), a non-profit organization dedicated to informing the public about the benefits of free trade and mobilizing farmers to take action to support beneficial trade agreements, has been closely monitoring the development of the U.S.-China trade agreement.

FFT spokesperson Michelle Erickson-Jones released the following statement in response to the signing of the first phase of the agreement:

"While Phase One makes incremental progress, it remains to be seen whether it will deliver any meaningful relief for farmers like me. This deal does not end retaliatory tariffs on American farm exports, makes American farmers increasingly reliant on Chinese state-controlled purchases and doesn’t address the big structural changes the trade war was predicated on achieving. The promises of lofty purchases are encouraging but farmers like me will believe it when we see it.

"In the months ahead, we will be closely scrutinizing the purchase promises in this agreement. We will see whether Phase One takes steps to dig out from the hole the trade war created or whether like previous ag purchase promises it is all talk. In the meantime, the Administration should waste no time in returning to the negotiating table and reaching an agreement that ends the trade war for good."

Zippy Duvall, president of American Farm Bureau Federation, praised the signing of the agreement, saying it was “an important step in giving America’s farmers and ranchers the ability to get back to business in the global market.”

“China was once the largest market for U.S. 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. The potential of tens of billions more in exports is welcome news for farmers who are eager to compete on a more level playing field,” said Duvall.

The North American Meat Institute also applauded the Phase One trade deal with China, which it says is a vital and growing market for the meat and poultry industry.

“We are encouraged by the Phase One deal with China, which eliminates non-tariff barriers to trade with our fastest growing market for meat and poultry products. We will continue to work with the Trump Administration to negotiate greater access to Chinese markets,” said Meat Institute President and CEO Julie Anna Potts. “It remains vital to address retaliatory tariff issues, which have made it difficult to export to China.”

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