Phase one trade agreement still elusive
November 19, 2019 Category Foreign trade, Weekly
Robert Lighthizer (left) and Liu He talked on the phone last week
A “phase one ”trade agreement between the U.S. and China remains elusive. President Donald Trump has not yet agreed to remove any tariffs as part of a deal, and the size of China’s commitment to purchase U.S. farm products has not been fixed, said U.S. Commerce Secretary Wilbur Ross in an interview on Fox Business Network. Top U.S. and Chinese negotiators had a “constructive” phone conversation last week, and agreed to “maintain close communication”, but remained split on key issues. Both Ross and White House Economic Adviser Larry Kudlow remained optimistic, saying the two sides were “getting close” to a deal. Kudlow added that a partial trade agreement could be signed at the ministerial level, not by the two nations’ presidents, but that no place and date for the signing had been agreed.
U.S. President Donald Trump’s insistence that China buy USD50 billion worth of American agricultural goods may help drum up electoral support across the Farm Belt, but is “not really possible” in practice, industry insiders have said. The figure has been repeatedly cited by Trump and his supporters as a condition of a trade deal. But China has never confirmed the figure and has pushed back on committing to any fixed number, stating repeatedly that it would only buy in accordance with market conditions. Agricultural analysts have said that even if China agreed to such a massive purchase, it would be extremely difficult to make it work in reality. China imported USD137 billion in agricultural goods in 2018, but it has never bought more than the USD25.9 billion from the United States in 2012. That figure shrank to USD9.2 billion last year, as tariffs weighed heavily on the bilateral farm trade.
“With the African swine fever, there’s just not much demand for the stuff that the U.S. has to offer in terms of corn or soybeans to feed pigs – because we just do not have any pigs. We’ve lost half of them!” said Darin Friedrichs, Senior Asia Commodity Analyst at trading house INTL FCStone in Shanghai. The crisis has driven down soybean prices from USD13 per bushel two years ago to just USD9 today. “So even if they bought the same amount they did before the trade war, it’s just not going to make the same dollar value,” Friedrichs added, as reported by the South China Morning Post.
China removed a ban on U.S. poultry products, keen to arrest the exponential rise in prices of chicken, the pork alternative of choice in many Chinese households. American agricultural negotiators are also keen to reopen China’s giant consumer market to American beef, pork and other meat products, many of which have been banned due to the use of hormones. According to The New York Times, Washington is to extend temporary licenses for American users of Huawei equipment for the third time, as the previous 90-day extension expires on November 19. The newspaper also suggests that the Trump administration is considering “product-specific” licenses that would allow some companies to keep supplying Huawei.
At the 11th BRICS Summit in Brasilia, Brazil, Chinese President Xi Jinping reiterated the need to uphold multilateralism in a globalized world, and added that international affairs should be addressed through extensive consultations rather than decided by one or a few countries. Xi said that no country is born to be dominant and no model is destined to be superior. The era of globalization should not see some people fighting against others, but should instead see all bringing benefits to all, the China Daily reports.
The future of the world depends on how the top two economies work out solutions and prevent their conflict from escalating into a permanent one, said former U.S. Secretary of State Henry Kissinger. “I am confident that the leaders on both sides will come to realize that the future of the world depends on their capacity to analyze the challenges together, to work out solutions, and to manage the inevitable difficulties,” the 96-year-old said at an annual gala dinner of the National Committee on U.S.-China Relations (NCUSCR) in New York. “There may not be a complete agreement. What is imperative is that both countries understand that a permanent conflict between them cannot be won,” Kissinger said. “There will be a catastrophic outcome if it leads to permanent conflict,” he added.
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