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Trade developments remain at the core of agriculture’s concerns

Trade developments remain at the core of agriculture’s concerns

11.27.2019
By Robbin Johnson






I have resisted writing about impeachment, but that is becoming increasingly difficult to do. The impeachment “inquiry” process has gathered steam over U.S. President Donald Trump’s dealings with Ukraine, and the prospects of a House impeachment vote and a Senate trial have become more likely. Needless to say, that would consume the time and attention of Congress.
Still, there is much non-impeachment news for agriculturalists to watch. Trade developments remain at the core of agriculture’s concerns. Among the most important are: the U.S.-China trade “truce”; other trade agreements; and potential new sources of retaliation.

Inside the U.S.-China trade talks
In mid-October, President Trump suspended a pending hike in tariffs on $250 billion of Chinese exports and hailed a “breakthrough” in the U.S.-China trade talks. Of particular interest to agriculture is a supposed Chinese commitment to purchase $40 billion to $50 billion of U.S. farm products “in less than two years.” Though Chinese spokespeople confirmed that characterization in general terms, nothing has been committed to paper as this article goes to press.
Further talks are scheduled, even while skepticism persists over China’s willingness to compromise on subsidy and intellectual property issues that have been at the heart of the two countries’ disagreements. Moreover, both the suspended duties and a plan to impose new 15% tariffs Dec. 15 on $156 billion of consumer goods remain overhanging this whole process.
China has been increasing soybean and other farm-product purchases from the United States in recent weeks. It is unclear, however, whether this is simply a normal swing in origins from the southern to the northern hemisphere’s harvest, amplified by China’s need to offset an estimated 40% reduction in its hog population because of African swine fever. So, in spite of heightened optimistic rhetoric, much remains to be done to lock in a real trade truce between the two countries.
Other trade agreements
When President Trump withdrew the United States from the Trans-Pacific Partnership (TPP), the other 11 member countries in 2018 entered into a Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Among other things, this deal gave Canadian, Australian and New Zealand farmers preferential access to Japanese and other Asian animal-product and grain markets.
On Oct. 7, the United States and Japan signed a bilateral trade agreement that, over time, will reduce those preferences and put U.S. farmers on an equal footing for beef, pork and wheat trade worth more than $2 billion while immediately eliminating Japanese tariffs on other agricultural products worth $1.3 billion.
The U.S.-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA) remains sidelined in Congress. Other countries, however, have been moving ahead in trade negotiations. Since 2016, the European Union has struck trade deals with Japan, Canada and the Mercosur countries of Latin America. While the United Kingdom-E.U. battle over “Brexit” has dominated trade coverage on the European front, these other trade deals have resulted in agreements covering issues like “geographical indicators,” intellectual property protections and dispute settlement that vary from positions the United States has preferred.
Sources of potential retaliation
Already mentioned above were the mid-October U.S. suspension of duties on $250 billion in Chinese exports and the pending Dec. 15 new duties on another $156 billion in Chinese sales to the United States. If those duties get imposed, U.S. agricultural shipments to China likely would take another retaliatory hit. The meeting between President Trump and Xi Jinping at the November Asia-Pacific Economic Cooperation (APEC) forum is likely to be an important signal on this front.
On an entirely different track is a U.S.-E.U. trade dispute before the World Trade Organization (WTO).
The WTO in mid-October authorized U.S. retaliation worth $7.5 billion in its complaint over E.U. Airbus subsidies, and the Trump administration quickly imposed duties on wine, whiskey and large aircraft. The WTO is scheduled to rule early next year on a parallel European Union suit over U.S. aid to Boeing. If it authorizes retaliation — as seems likely — U.S. agricultural exports to the E.U. would be a likely target of E.U. retaliation.
This U.S.-E.U. dispute over aircraft subsidies reflects many of the problems the WTO poses for trade governance. The dispute process is long and arduous, 15 years in this case. It is incomplete in that it does not reach effectively to other aerospace issues, such as Russian and Chinese support for their aviation industries. And, if the dispute cannot be resolved within the aerospace activities of the disputants, the remedy is retaliation — legitimate but still troublesome for global trade more generally.
All of this means that uncertainties will continue to hang over U.S. agriculture and its trade interests. Even if trade wars prove “winnable,” it is painful to be at the sharp end of the spear in such disputes.