Another installment of the U.S.-China trade discussion has again come with high praise but with little actual information.
On the afternoon of Thursday, Oct. 11, President Donald Trump announced that the U.S. and China had come to a “substantial phase one deal” on trade. The president claims the deal, which he later called “an agreement in principle,” will involve China buying $40-50 billion in agricultural goods.
“I mean, it’s an incredible deal for farmers,” he said later that same day in comments to the press. “I think they’ll have to go out and buy more land and buy bigger tractors.”
However, the announcement included very few details and, as of press time a week later, neither the White House nor the Office of the U.S. Trade Representative (USTR) had released official information on the agreement.
During the announcement, made from the Oval Office, Trump, USTR Robert Lighthizer, Treasury Secretary Steven Mnuchin, and China’s Vice Premier Liu He offered some details of the proposed phase one deal.
Trump said that the deal is “subject to getting it written,” which he estimated would happen in the next three to five weeks, possibly during the approaching Asia-Pacific Economic Cooperation (APEC) Summit which will be held in Chile in mid-November.
Lighthizer said that in addition to the claimed agricultural purchases China will be making, the phase one deal includes corrections to a variety of sanitary and phytosanitary, and biotechnology issues regarding trade with China.
“It will be much easier now for American farmers to be able to ship to China,” he said, according to a White House transcript of the event.
Mnuchin clarified that, as per Chinese request and Trump’s approval, the U.S. would not raise tariffs on $250 billion of Chinese goods from 25 percent to 30 percent on Tuesday, Oct. 15 last week as planned while the trade talks continue. Later in the announcement, Lighthizer clarified that the scheduled Dec. 15 tariff increase is still planned but is subject to change.
During the announcement, Liu thanked the U.S. administration and trade team for continuing to work on the trade discussions. He additionally said that China has already bought 20 million tons of soybeans.
Few details given
There were few solid details or dates offered in the announcement. At one point during the question-and-answer session following the announcement, Trump clarified that the deal is an agreement in principle rather than a finished deal. He repeatedly said that it had to be put down on paper.
When asked if it might fall apart, as has been the case in recent announcements of this sort, he said that “anything can happen.”
“I think we have a fundamental understanding on the key issues,” Mnuchin said in answer to the question.
“We’ve gone through a significant amount of paper, but there is more work to do. And we will not sign an agreement unless we get and can tell the president that this is on paper. And I know the vice premier needs to go back and do some work with his team, but we’ve—we’ve made a lot of progress over the last two days.”
An official statement released last week by China’s Ministry of Finance similarly held few details.
“The two parties gained substantive progress on agriculture, intellectual property, exchange rate and financial services, expanding trade cooperation, technology transfer and disputes settlement,” the statement read, as translated. “The two parties also discussed the follow-up arrangement of consultations and agreed to make joint efforts to achieve the final agreement.”
Regarding details of the claimed $40-50 billion in agricultural purchases, Munchin responded to timeline questions. He said China’s purchases will scale up to that annual figure within two years.
According to the American Farm Bureau Federation, China bought $9.1 billion in U.S. ag products in 2018, and $19.5 billion in 2017. In 2014, ag exports to China reached a high of over $24 billion. According to the U.S. Meat Export Federation, the value numbers for exports of beef and beef variety meats to mainland China (excluding Hong Kong) for those years were $60.8 million, $31 million, and $271,000 respectively.
Most of China’s purchases of U.S. ag products has historically been in the form of soybeans and pork. According to reporting by DTN’s Todd Neeley, the U.S. exported 13.4 million metric tons (mmt) of soybeans to China in 2018-2019, down from 27.7 mmt in 2017-2018. USDA has reported China bought 2.09 mmt of U.S. soybeans during Sept. 27 to Oct. 3 and has stepped up purchases of U.S. soybeans, totaling 4.79 mmt for delivery in the 2019-20 marketing year compared to just 1.08 mmt the same time last year. Neeley also reported that China has bought 142,000 tons of pork for 2019-20.
Lingering doubt
The similarity of this deal announcement to past, failed deal announcements was not been missed. Both February and April of this year saw announcements of deals that eventually fell through.
During the question-and-answer session following the announcement, and during remarks made by the president to the White House press gaggle afterwards, members of the press asked Trump what is different about this announcement.
“Well, I think we got to know each other a lot better,” Trump said in answer. “Don’t forget, there’s been a lot of back-and-forth since that happened. We thought we had a deal, and perhaps they didn’t, but it didn’t work out that way. This deal is a bigger deal than the last deal, relatively speaking. Now, we’re talking about big parts of it, with financial services and agriculture.”
Later, when asked if China will “keep their word this time,” Trump said they will, but offered no reasoning.
Chinese officials and China’s state-run media have had more of a skeptical tone on the agreement’s future.
“The U.S. must concede on its December tariff threat if they want sign a deal during APEC summit, otherwise it would be a humiliating treaty for China,” said Huo Jianguo, a former Chinese commerce ministry official who is now vice chairman of the China Society For World Trade Organization Studies according to DTN’s Washington Insider.
“The U.S. has definitely shown some good gestures but we shouldn’t exclude the possibility of another flip-flop.”
An opinion piece run in China Daily, an English-language daily newspaper owned by the Communist Party of China, described the phase one deal as extremely welcome news “if delivered.” It characterized U.S. behavior in the discussions as unreliable and self-serving. — Kerry Halladay, WLJ editor
