The tariff trade war tit-for-tat continues. After the U.S. raised tariffs against Chinese goods and threatened more, China raised tariffs on U.S. goods. With those Chinese tariffs heavily targeting ag products, talk of more trade aid quickly followed.
President Donald Trump began tweeting about the possibility early on the morning of Friday, May 10. By Wednesday, May 15, Agriculture Secretary Sonny Perdue told reporters in a call from South Korea that a second trade aid package for farmers totaling $15 billion to $20 billion is being looked at, according to reporting by DTN’s Jerry Hagstrom.
Regarding the price tag, Perdue said it is based on an “early estimation of the trade damage based on our calculations from last year,” according to DTN’s Washington Insider. “We’ve asked our economists at USDA to be very precise,” Perdue reportedly added, saying the total will be “legally defensible” to the World Trade Organization (WTO).
The WTO has rules regarding subsidies. There is a risk that direct payments like those seen in the earlier $12 billion trade aid package—first announced in July 2018 and which included the direct payment Market Facility Program (MFP)—could run afoul of those subsidy rules.
Though the president has repeatedly claimed China will be paying the new and increased tariffs, and that the trade aid funds would come from Chinese tariff payments, Perdue reportedly said the trade aid money will come from the Commodity Credit Corporation. The previous trade aid package also came from this source, which has a $30 billion per fiscal year cap.
According to Hagstrom, Perdue said the administration is “studying the text” of the supplemental disaster aid bill currently being examined in Congress to see if it might be a possible source of funding for trade aid.
Though Perdue was not specific on the trade aid timeline, USDA Trade Undersecretary Ted McKinney has been quoted widely saying the package will be out soon, describing it as coming in “days, not weeks or months.”
In the first round of trade aid, beef producers were not eligible for the MFP direct payments and beef was not a focus of either of the other two programs; the Food Purchase and Distribution Program, or the Trade Promotion Program.
China trade and tariff impacts
Kent Bacus, senior director for international trade and marketing for the National Cattlemen’s Beef Association (NCBA), spoke during NCBA’s Beltway Beef podcast on Wednesday about the future of trade talks with China. He said that the continued commitment from both sides to keep talking “speaks volumes,” but that successful negotiations will take more time than people might think.
“We’re hopeful that this will resolve soon, but I think we all need to be prepared that this negotiation could continue if China is not willing to make the necessary concessions that are important for U.S. agriculture and for other sectors of our economy,” he said.
Bacus also noted that, while tariffs are “the headline grabbers,” and that beef was included in China’s most recent round of retaliatory tariffs, non-tariff barriers to trade—like age-based restrictions, hormone bans, and other “sanitary and phytosanitary” measures—are a potentially bigger issue to the U.S. beef industry.
“The non-tariff barriers have kept us from reaching our potential in that market,” Bacus said.
“We should be able to sell to the Chinese market without any of these non-science-based restrictions. However, China is going to have to make some major moves, domestically, to make that happen, and that’s what this negotiation is about; to find a way forward. Try to find a way to allow U.S. beef producers to meet that growing demand in China.”
Citing analysis from the U.S. Meat Export Federation, Bacus said removing non-tariff barriers to trade against U.S. beef would be worth $4 billion in five years. For context, the total value for U.S. exports of beef (muscle cuts and variety meats) in 2018 was $8.3 billion.
“That is a tremendous opportunity,” noted Bacus. “We have to continue to push to open that market because we could have zero tariffs into the Chinese market, but if we don’t address these non-tariff barriers, then it’s not going to be as lucrative as it should be. It’s not going to be as meaningful for U.S. producers.” — WLJ
