The pundits haven't been kind to Donald Trump's "phase-one" China trade deal. The president ballyhooed it, promising $40 billion to $50 billion in purchases of U.S. ag products. Many pundits dismissed it.
My own initial reaction was "two cheers." (https://www.dtnpf.com/…). I withheld the customary third cheer because the deal seemed vague and preliminary, with lots of negotiating still to be done.
Others were much more skeptical. "Another U.S.-China No-Deal Deal" was how Mary Lovely of the Peterson Institute for International Economics described it (https://www.piie.com/…). "A nothing-burger," said Scott Kennedy at the Center for Strategic and International Studies (https://www.apnews.com/…).
Long-time China hand Jim McGregor, China chairman of APCO Worldwide, was particularly skeptical of the promised Chinese ag-buying binge: "This $50 billion in agriculture -- there was $9 billion in American farm goods exported to China last year. We're going to bring that up to 50 billion? What are they going to do? Build soybean mountains around different cities in China?" (https://www.bloomberg.com/…)
Some ag people also got into the act. When Bloomberg ran a headline saying China was tying big ag purchases to an actual reduction in U.S. tariffs, and not just no new ones, Farmers for Free Trade tweeted: "Shocking! You mean China's not going to buy $40-50 billion in ag products until our tariffs are lifted? Couldn't have seen that one coming . . . " (https://twitter.com/…)
With so many Americans voicing skepticism, it's worth looking at what China has said. If I had to sum it up, I'd say the Chinese have neither endorsed nor contradicted Trump's ballyhooing. They've been artfully dodging.
For example, they've been hesitant to use the term "deal." A government spokesman did agree the two countries are "on the same page" -- without specifying what page it is. (https://www.scmp.com/…)
On the critical -- to farmers and ranchers -- question of the $40 billion to $50 billion, the dodging has been especially artful. At times the Chinese have insisted their buys will depend on market prices and domestic demand. At other times they've been more encouraging, while stipulating that it all depends on the terms of the final deal.
Bloomberg quoted non-named somebodies in Beijing hinting that in the final deal China might agree to $20 billion in year one -- roughly in line with pre-trade-war totals -- and maybe a big jump to $40 billion to $50 billion in year two if Trump gives them enough tariff reductions. (https://www.bloomberg.com/…)
My bottom line hasn't changed. Until there's a signed agreement on paper, it's at best a two-cheer deal. But I wouldn't write it off as a pipedream.
The president hopes there could be a signed agreement on paper by mid-November. (https://www.cnbc.com/…) If anything is standing in the way of that happening, it's probably the lingering conviction on each side that the other is more desperate for a deal.
Trump seems convinced his tariffs are inflicting unbearable economic pain. But are they? China's growth has indeed slowed to the lowest annual rate in decades, but that rate -- 6% -- is still pretty fast by most countries' standards, and not all the slowing is tariff-related. That's not to say the Chinese don't want tariff relief; it would undoubtedly give their economy a boost. It's to question how desperate they are. McGregor thinks the answer is not very. The White House, he says, "is still pretty delusional."
For their part, the Chinese see Trump going into an election year facing an impeachment proceeding. They could be forgiven for thinking Trump would do anything for a deal. No doubt he'd love one, it would certainly help him with the farm-state vote. But the Chinese may underestimate his ability to live with failure. He might even try to convert a no-deal to points with the electorate: "You need a tough president like me who is willing to say no to a bad deal."
There remains then, it seems, serious potential for miscalculation. The Chinese, though, may have made the better assessment. For Trump has already made a major concession by agreeing to negotiate in phases, as they have long desired.
The first-phase negotiation, the one that may or may not get wrapped up in November, is mainly about Chinese ag purchases and American tariff relief. The really tough issues, like extortion of American companies' intellectual property and subsidies to state-owned companies, have been put off until a later phase.
The Chinese, naturally, have no interest in getting to that phase, and if we do ever get there they'll bargain tough. A deal may prove unobtainable. Farmers and ranchers should be happy they're in phase one.
Urban Lehner can be reached at email@example.com
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