Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.Xinhua: US Pecan Growers Eye Regaining Chinese Market Via Phase One Trade Deal
The state-run Xinhua News Agency reported U.S. pecan growers are eager to get back into the Chinese market. In 2017, U.S. pecan in-shell exports reached more than $300 million with more than 76% going to China.
The report noted U.S. growers indicate the trade battle with China has prompted a 40% decline in prices via oversupply from the loss of exports to China.
Meanwhile, early this week Bloomberg reported U.S. chicken firm Sanderson Farms has kick-started exports to China after a ban on American poultry supplies was lifted last month. The company earlier this month sent its first container of chicken feet to China since the 2015 ban and is loading more this week, said Chief Executive Officer Joe Sanderson. The third-largest U.S. chicken producer expects the 35% tariffs will be removed next year, helping accelerate exports.
Green Plains Ethanol expects the corn-based fuel will also be in the mix, predicting there could be one billion gallons of the product moved to China.
Trying To Gauge Products In US Exports To China Under Phase One Deal Not Just a US Exercise
The effort of trying to determine what products are expected to be involved in the phase one deal with China is also going on within China.
The China Daily reported Zhang Xinyuan, a researcher at Huatai Securities, said “increased imports from the U.S. will mainly include crude oil, semiconductors, gas, soybeans, consumer goods, automobiles, ethanol and tourism services.”
From a macro perspective, the paper said that the phase-one deal will reduce downside risks to the global economy, with Ding Shuang, chief economist of Greater China and North Asia at Standard Chartered predicting 2020 “should be a year of soft but stabilizing growth for the global economy.”
Washington Insider: Growing Trade Policy Angst
The media are increasing their focus on trade policy now and pointing out that for years America’s trade agreements have tried to break down economic barriers and remove tariffs and other impediments to cross-border commerce. However, the newly emerging deals “have turned that approach on its head” the New York Times reported last week.
For example, while the phase one China deal promises to lower some of the walls Beijing has erected for foreign companies -- including opening its financial markets, streamlining imports of American agriculture and offering greater protection for intellectual property -- it leaves in place tariffs on the bulk of Chinese imports, more than $360 billion worth of goods.
And it requires some $200 billion of additional purchases of U.S. products over the next two years, according to the Trump administration, but also “moves trade policy away from promoting free markets and back toward an earlier era of managed trade.”
The Times notes the new NAFTA similarly contains provisions that open up markets for dairy, digital services and other industries. But its most “transformative changes” tighten the rules for North American automotive manufacturing to try to spur more production within the continent, a move some Republican lawmakers say will weigh on trade.
The New York Times sees these modifications as “the product of the administration’s 'transactional trade approach,' one that aims to wield America’s economic power to force other nations to buy more American products. President Trump's 'America First' philosophy looks with suspicion upon global supply chains and free trade deals and seeks to force sprawling multinational companies to move operations to the United States in an effort to lower the trade deficit.”
The Times also charges the administration has little use for the type of multilateral organizations that have tried to lift economic growth around the world by promoting free trade. Last week, the administration effectively crippled the World Trade Organization’s ability to resolve trade disputes after a sustained campaign against a critical part of the body.
Doug Irwin, a trade historian at Dartmouth College, said the pacts were a substantial departure from those enacted under previous U.S. presidents -- both Republicans and Democrats. “Most trade agreements that we’ve seen in recent history are agreements to liberalize markets,” he said.
In a TV interview last week, Robert Lighthizer, the administration’s top trade negotiator, acknowledged the agreements were not likely to please those who prioritized free markets.
“I understand the people that believe in just protecting investors and pure market efficiency,” Lighthizer said. “They’re not going to be happy because we are making it more expensive to operate in some other areas and less expensive in the United States.”
President Trump’s aggressive approach to reworking the global trading system has been praised by some parts of industry as an attempt to fix a situation they say has been disastrous for American workers.
“Trump and team have what appears to be a strong deal,” Daniel DiMicco, a former steel industry executive, who leads the Coalition for a Prosperous America, said of the China trade pact.
Still, many economists and trade experts fear the approach could backfire on the United States, by degrading the international trading system and raising the cost of manufacturing -- resulting in lower productivity and economic growth.
In a recent analysis, Mary E. Lovely and Jeffrey J. Schott, two economists at the Peterson Institute for International Economics, projected that the provisions in the U.S.-Mexico-Canada Agreement would hurt American industry by driving up the cost of making cars and dampening growth.
Analysts at Fitch Ratings said Tuesday the China deal had raised their estimates for global growth but does less to lower trade barriers than anticipated. The trade truce leaves the effective American tariff rate on Chinese products at 16%, below the 25% level that the president had threatened, but up from roughly 3% before the trade war, they said.
The North American and China pacts, which together cover countries responsible for more than half of America’s trade, are the first translation of the administration’s trade ideals into policy.
But they also bear U.S. Trade Representative Lighthizer’s imprint and his long history of favoring a “managed trade approach” as a Reagan administration official, the Times said. The WTO later banned agreements that seek to restrain a country’s exports.
That history has direct parallels to China, where American officials have been urging the government for decades to reduce its role in the economy.
Administration officials, including Lighthizer, have also criticized Beijing for using preferential policies, subsidies and central planning to give its businesses an advantage over American ones. But the trade deal announced this month appears to make little progress on those issues. Instead, its largest feature appears to be purchases that are likely to be beneficial for American businesses but may wind up further strengthening the hand of the Chinese state.
So, we will see. Competitive prices for U.S. goods and increasing access to developing-country markets are fundamentally important to U.S. producers and the newer administration approaches should be watched closely by U.S. producers to determine their likely longer-term impacts on ag industries -- along with potential implication for government interventions in both the U.S. and its trading partners, Washington Insider believes.
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