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Even though 2020 has been a tumultuous year, the effects of the Phase 1 agreement show a positive way forward for U.S.-China trade relations, writes Timothy Wier for The Cattle Site.

“The trade war has turned it around, but we’re back to the trend,” Jason Hafemeister, TFAA Acting Assistant Deputy Secretary, said during his presentation at the 97th Annual USDA Agricultural Outlook Forum. “We see a lot of potential in a free trade environment to dramatically increase our sales.”

When China was admitted to the World Trade Organization (WTO) in 2001, it was a billion dollar market. Today it is $ 25 billion. Besides the trade war, US agricultural exports to China have been increasing year on year.

Before the trade war, the United States sold $ 24 million worth of agricultural products to China. This accounted for 20-25% of all imports of Chinese agricultural products. In 2018 and 2019, tariffs hampered US sales to China, reducing that market share to 10%.

Today, however, the US market share has grown to 14%. While this may seem like an increase, the fact that the Chinese market is growing and competitive makes it a less impressive figure. In addition, the United States did not meet the target of $ 36 billion set out in the phase one agreement.

The United States also faces fierce competition from other countries in several key areas:

• The United States leads in grains and cotton
• Brazil leads soybeans
• Europe at the head of meat

“In addition to what we are doing in China, we see our competition doing even better,” Hafemeister said. “This is an opportunity for us to improve our competitiveness.

Impact of the phase one agreement

The phase one agreement removed some key technical barriers to US trade. These include the removal of bans on poultry and beef, provided they are subject to tolerance. As a result, the US pet food markets have access to Chinese poultry and beef, opening up millions of dollars in potential sales.

China has also removed a series of technical restrictions on US exporters. These included facility and product registrations that restricted individual U.S. companies whose registration had not yet been processed.

However, repairing the business relationship is still a work in progress. Although China has multi- and bilateral obligations to the United States, seeing those obligations fulfilled in practice is an unfinished story:

• China still hasn’t met its product and purchasing requirements (although it has rebounded)
• China still rolls back technical restrictive measures
• China also removed retaliatory tariffs, allowing the United States to participate in growing markets

Crop export performance 2020

While the specific numbers vary from culture to culture, the general story is that most American cultures will exceed their 2017 numbers (before tariff), signaling a recovery in the Chinese market.

Animal market dynamics have had to face a much steeper rise, due to the fact that US meat has been excluded from the Chinese market since 2017. However, 2020 has seen a recovery and growth in several key sectors.

Here are some examples of the performance of some American agricultural products:

• Soybeans showed $ 14.2 billion in 2020
• Cereals posted $ 2.9 billion in 2020; Corn specifically showed just over $ 1.2 billion, a record year for the harvest
• Cotton brought in $ 1.8 billion in 2020
• Tree Nuts posted $ 700 million in 2020
• Meat showed $ 3.2 billion in 2020; Pork topped $ 2 billion, beef just over $ 300 million, and poultry $ 750 million

Going forward, the USDA has made specific predictions on the expected performance of key crops:

• Soybeans Expected to Increase $ 2.0 Billion to $ 38.3 Billion in 2021
• Grain and feed products (corn, wheat, sorghum) are expected to increase by $ 2.2 billion to reach $ 37.8 billion in 2021

The past few years have been difficult for US-China trade relations. But with these new deals and continued market growth, the United States is poised to perform well in what is quickly becoming the world’s largest agricultural import market.