Emphasis on US exports, trade secrets in China trade deal

President Donald Trump shakes hands with Chinese Vice Premier Liu He, after signing a trade agreement in the East Room of the White House, Wednesday, Jan. 15, 2020, in Washington. (AP Photo/Evan Vucci)

President Donald Trump signed a trade agreement with China meant to help ease tensions and it could be a boon to Ohio farmers, according to local and state experts.

In addition to structural reforms to China’s economic and trade regime, the agreement also includes a commitment by China to purchase U.S. goods and services in the coming years.

Ian Sheldon, professor of agricultural marketing, trade and policy at Ohio State University, said there are two key agricultural components to the trade agreement.

“One, it looks like China is going to tidy up and relax some of their non-tariff barriers to trade as they relate to food safety issues and that would be beneficial, I think, to the meat and poultry exporting sectors,” he said.

The other aspect beneficial to farmers is that China has agreed to certain trade benchmarks for U.S. agriculture goods. In 2020, it has committed to around $40 billion in imports and $43.5 billion in 2021, Sheldon said.

“These are commitments by the Chinese,” he said. “We’ll have to wait and see whether they actually meet these commitments and whether U.S. producers can actually meet that demand.”

Sheldon added the exact text of the 96-page agreement had only just been released, so his comments were based on a summary released in December.

Stephanie Karhoff, agriculture and natural resources educator with the Williams County OSU Extension office, called the deal “a step in the right direction.”

“Most farmers here have been affected in some way by the trade tariffs and, overall, these farmers prefer trade agreements advance rather than rely on government payments like the Market Facilitation Payments (MFP),” she said.

The Trump administration has made payments through the MFP program to help farmers who have been negatively affected by the trade war.

In 2019, Congress approved up to $16 billion in payments and programs for affected farmers. Set for release in up to three tranches, two have been approved so far with a third tranche still possible.

Karhoff said tariffs are hurting local farmers because many agricultural goods, especially soybeans, grown in the area are exported to China.

Sheldon said as a rough rule of thumb, Ohio used to export one in three rows of soybeans to China. That is now down to about one in 10.

“If China gets back to importing approximately what it was in soybeans prior to the trade war, then it’s going to be good for Ohio soybean farmers,” he said. “If they actually increase those imports to the levels they’re committing to, I’m assuming that has the potential to be good for soybean exporters, possibly corn and wheat exporters and possibly exporters of pork.”

Reaching a deal with China has been complex, Sheldon added, and this deal is only the beginning.

Karhoff agreed, saying she expected more phases and information to come in the future.

“It’s a step in the right direction but by no means the last one,” she said. “I just hope they keep signing agreements.”

Sheldon said other good aspects of the agreement include China committing to stopping the theft of U.S. intellectual property and stopping forced transfer of technology.

He also said there were good enforcement measures, as well.

“I will say the U.S. will not be getting rid of all the tariffs it has put in place over the last two years,” Sheldon said. “That’s 25 percent tariffs on about $250 billion worth of imports. Some additional tariffs are going to stay in place.”

This means average tariffs from China will be around 19 percent on about 65 percent of imports.

Meanwhile, the Chinese will have around 20 percent tariffs on around 55 percent of U.S. goods imported.

“So, there’s a new equilibrium there,” Sheldon said. “They’re not going to implement new tariffs, so you can see sort of a truce in the trade war. But, they’re not ratcheting back tariffs that are already in place. I think that’s actually been quite harmful to the U.S. economy, it’s probably knocked off about 1 percent of our GDP.”

Another missing component from the agreement, he said, is it doesn’t cover Chinese industrial policy in relation to subsidies to the state-owned enterprises.

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