President Donald Trump is scheduled to sign phase one of a U.S.-China trade deal on Jan. 15 at the White House.
After announcing the deal the president told farmers that they’d need to buy bigger tractors because they will be selling so much to China.
But in the month since the deal was announced, no written agreement has been produced and the Chinese have not confirmed or denied the terms released by the White House. That has led to a great deal of justified skepticism that the agreement could be as rich as advertised.
Under the deal the U.S. agreed to suspend a new round of tariff hikes on $160 billion worth of Chinese goods that were to go into effect Dec. 15, and to reduce tariffs on $112 billion in goods that are already in place. China agreed to buy $40 billion — and perhaps as much as $50 billion — worth of agricultural goods from the U.S. a year for the next two years.
The Chinese also agreed to reduce barriers to beef, poultry and animal feed, and to increase protections for intellectual property.
China’s commitment to $40 billion in ag purchases is extremely ambitious, given its purchases have never come close to that amount. In 2013-14 they hit a record of just under $26 billion a year. Skeptics point out that in 2013 commodity prices were much higher than they are today, making it easier to hit even that mark. The Wall Street Journal reported that soybean future prices were about 40% higher in 2013 and wheat and corn futures were about double what they are today.
“History has never been even close to that level,” Chad Hart, an agricultural economist at Iowa State University, to The Associated Press. “There’s no clear path to get us there in one year.”
Other analysts say that China could easily step up its purchases of American pork. Its domestic pork production has been severely reduced because of an outbreak of African swine fever. China buys $40 billion in soybeans on the world market each year. As much as a third of that has been supplied by the U.S., leaving room for additional sales if supplies exist.
“The purchases should be based on market principles,” Tu Xinquan, director of the China Institute for WTO Studies in Beijing, told The Associated Press. “The United States should compete with other countries through price and quality.”
So, the exact terms of the agreement seem ambiguous and open to interpretation.
Farmers will be thrilled if the actual purchases come even close to what’s been promised by the administration. And so will tractor dealers if bigger machines are needed. But it’s time for the White House to provide a text that provides in clear language exactly how much the Chinese will be buying.