This new China trade deal is good for agriculture and should reopen this market in a big way. The dairy industry got a great deal. The beef industry also got a great deal. Jennifer Houston, NCBA’s president, said that the China trade deal was a “game changer” for the beef industry.
China should be a growing market very soon, even with a 47 percent import tariff. The Trump administration did a great job for the beef industry and was a high priority issue. Houston also said, “Restoring U.S. beef access to China was the top agenda item resulting from the Mar-a-Lago summit in 2017.” Tariff rates should be the next issue to work on. Beef tariffs prior to the trade dispute were 12 percent and Australia has a 6 percent tariff advantage.
I watched the signing ceremony and was overwhelmed by how many people the president introduced. It was a who’s who of the nation’s business world. The Phase One deal contained a lot of trade elements from agriculture to pharmaceuticals. I’m anxious to see what they come up with in Phase Two.
China dropped the age restrictions on U.S. beef. You must remember that they shut us out of their market in 2003 after the BSE episode. Then in 2016 they opened their market to cattle under 30 months. So, they are finally over the BSE fiasco and realize the OIE (World Organization for Animal Health) has classified the U.S. as a negligible risk country for BSE, which is as good as it gets.
They will also recognize the U.S. traceability system we have, which isn’t really a system. We can tell them where a calf was born, and we can tell them where it was slaughtered. They have accepted the system every U.S. beef import customer has. I would think that the Chinese are getting serious about importing U.S. beef. They seemed to have wanted a bookend tracing system before.
It also appears they have yielded to the USDA’s Food Safety and Inspection Service (FSIS) on residue levels of certain vaccines and hormones, which is the international standard. They are agreeing to third party, science-based testing measures for sanitary and phytosanitary issues, which have traditionally been used as a non-tariff trade barrier. China is supposed to allow the import of beef products in the next 30 days and adopt minimum residue levels for several compounds, which have been approved by Codex standards and guidelines.
The only real challenge we must overcome is the use of beta agonists. There will be a great scientific effort to convince the Chinese that beta agonists aren’t a safety issue. The agreement says that one side cannot implement food safety regulations or require actions of the other party’s regulatory authorities that are not science or risk based. And they will only apply regulations that are necessary to protect human life or health. Essentially, we both need to agree on remedy for food safety. I would say if it’s good enough for FSIS it should be good enough for China.
China is to spend $40 billion on ag products over the next two years. Some folks say that might be hard to do. China did spend $24 billion in 2017. The Chinese are to spend an additional $12.5 billion on U.S. ag products this year and another $19.5 billion in 2021, tapping out at $43.5 billion. I just hope they can find ways to spend that much. The Chinese currently spend around $5 billion on beef imports in 2019.
A billion-and-a-half customers are a very tempting market and the doors are open wider to the U.S. beef producers. It has been suggested that China could become a $4 billion market for U.S. beef producers based on the logic that Japan spent $2.4 billion on U.S. beef in 2018 and South Korea spent $1.1 billion on U.S. beef. Those markets are a fraction of the market China represents.
The tariff deal is still bugging me. President Trump doesn’t seem too eager to start cutting tariffs because he doesn’t want to lose leverage. But there are plenty of safeguard features and enforcement mechanisms in the deal to keep everyone honest. And we’re still dealing with a Communist country and forcing them to do global business a different way. The rest of the free market world should be pleased with what Trump has accomplished.
We also saw the Senate pass USMCA last week and the president has signed it, so maybe we’ll get some tariff issues fixed with our neighbors.
It’s been a good week for international trade deals. The beef industry has had a lot of wins this year. This administration is business friendly, which is something we haven’t seen out of government for a long time. — PETE CROW
