The burning question in everyone’s mind is whether or not China is meeting their Phase One trade deal obligations. The Office of the U.S. Trade Representative (USTR) and the USDA has released a report over the progress made in U.S. agricultural sales to China.
The U.S.-China Phase One Economic and Trade Agreement was signed in January, with China committed to purchasing at least $200 billion more U.S. goods than 2017 in purchases over the next two years.
China pledged to purchase an additional $12.5 billion of covered agricultural purchases in 2020 on top of 2017 levels, bringing the total annual target to $36.6 billion (Chinese imports) and $33.4 billion (U.S. exports). U.S. and China statistics often don’t mirror each other due to different data collection and standards in each country.
China agreed to purchase at least an additional $63.9 billion of total covered goods by the end of the year, relative to 2017 trade data. Peterson Institute for International Economics (PIIE), an independent nonprofit, nonpartisan research “think tank,” defined the 2017 trade baseline using Chinese import statistics to imply a 2020 purchase target of $173.1 billion, and U.S. export statistics to imply a 2020 target of $159 billion.
In an Oct. 23 report, USDA reported China has purchased approximately 71 percent of its target for 2020, with $23.6 billion purchased in ag products, although “It is still to be seen whether they meet their target but particularly given the COVID-19 effects on the global economy they are making substantial progress.”
However, PIIE reported Oct. 27 that through the first nine months of 2020, China’s ag purchases were only at 65 percent (U.S. exports) or 52 percent (Chinese imports) of their year-to-date targets. Total U.S. goods purchased have only reached 53 percent of the expected purchase target through September. However, this data does not include exchange of services because that data is not reported monthly.
PIIE noted Chinese imports of U.S. goods are actually lower now compared to pre-trade war levels in 2018.
“No single reason explains why China has not met the phase one goals,” said PIIE in its report. “The COVID-19 pandemic did initially knock China’s economy on its heels, but its trade has recovered faster than most. And some U.S. exports to China—including medical supplies, pork, and semiconductors—actually accelerated in 2020.”
The research institute also calls out USDA’s released report as misleading, stating the report
presents data on projected U.S. exports—not actual U.S. exports as specified in the legal text of the trade agreement—based on weekly sales data for some farm products reported to USDA. PIIE utilized data from the U.S. Census Bureau for its report.
USDA’s methodology was to combine actual export numbers with the sales indicated in the USDA’s weekly export sales reports. Then, since the weekly sales reports only cover 80 percent of U.S. agriculture sales, they proportionally adjusted upward to cover products not included in the weekly reports.
USDA report
In addition to purchase obligations, the Phase One deal put a few other trade rules in effect. Some of these rules included lifting the ban on importing beef and beef products from animals older than 30 months of age; lifting restrictions on imports of U.S. pet food containing ruminant material; and expanding the list of beef products eligible for import.
As of Oct. 8, USDA reported U.S. beef exports to China were up 118 percent compared to the same time last year. The department also noted total accumulated beef sales to China in 2020 were 25 times greater than the same period in 2017.
Outstanding sales of corn to China were 8.7 million tons, an all-time high, while outstanding sales of soybeans to China stand at 17.4 million tons, double 2017 levels. Sorghum exports to China totaled $617 million, according to USDA, compared to $561 million for the same period in 2017.
Pork exports have been extremely strong this year, with China hugely impacted by African swine fever outbreaks. U.S. pork and pork product exports to China stand at over $1.5 billion from January through August 2020.
Alfalfa hay exports totaled $270 million and are on track to beat the previous annual record by the end of the year. Pet food exports totaled over $20 million, nearly doubling the previous annual record, according to the report. — Anna Miller, WLJ editor
