WASHINGTON, D.C. (KELO) — Gov. Kristi Noem (R-SD) and two South Dakota farmers were on hand as President Donald Trump and Chinese Vice Premier Liu He signed the first phase of a trade deal, between the two countries caught in a trade war.
“Keeping these two giant and powerful nations together in harmony is so important for the world,” Trump said. “The world is watching today.”
Noem announced the trip during Tuesday’s State of the State address. Sens. John Thune (R-SD) and Mike Rounds (R-SD) were also in the room.
“This will provide some much-needed relief to our farmers and ranchers who have been at the tip of the spear throughout the trade negotiations by reestablishing markets for them to sell their products. We still have more to do to make sure China lives up to its obligations, and phase one is the first step in that process,” Rounds said in a statement.
“Knowing first-hand the relentless effort that is needed to negotiate trade deals, I have a deep appreciation for our President’s leadership and commitment to mend the U.S.-China trade relationship,” Noem said on Tuesday.
The former Congresswoman echoed Rounds, saying more is ahead.
“Now, is everything finalized and negotiated with China? No. There’s other elements, other industries and other negotiations that still need to happen,” Noem said.
Breaking down the phase one agreement
Here’s what the agreement does:
- China has to increase purchases of U.S. manufactured, energy and farm products by a combined $200 billion in 2020 and 2021.
- China is supposed to buy $40 billion in U.S. farm exports (China has never bought more than $26 billion in agricultural products in one year).
- The U.S. is no longer going to impose additional tariffs on $160 billion, instead, they will do 7.5% existing tariffs on $110 billion of goods.
- It will be easier to bring criminal cases in China against people accused of stealing trade secrets.
- Measures to try and stop government officials in China from trying to get foreign companies’ trade secrets, which in turn goes to competitors in China.
- China has to come up with procedures to take down sites selling pirated goods.
- China must make it possible for sites to lose an e-commerce license for repeatedly not stopping the sale of counterfeit or pirated goods.
Explore the details further: Below we go in-depth the agriculture impacts of phase one.
Here is what phase one doesn’t do:
- Change the way the Chinese government subsidizes its companies (a top reason the Trump administration started the trade war).
- China still applies retaliatory tariffs on nearly 100-percent of U.S. agriculture exports, according to the U.S. Farm Bureau.
The deal does leave in place tariffs on $360 billion in Chinese imports, which will hopefully lead to the next phase.
South Dakota’s lone member of the U.S. House of Representatives calls it a win.
“The Phase One U.S.-China trade agreement is a step in the right direction,” Rep. Dusty Johnson said in a statement. “Producers want certainty and China needs to play fair – this agreement hits the mark on both fronts. This China agreement paired with the USMCA are the wins our producers need.”
Noem and the two farmers who flew to D.C. with the governor appeared in a video posted by The White House on Wednesday afternoon.
In a statement, Noem called it a historic deal opening new markets for South Dakota farmers and ranchers to feed the world.
“The agreement President Trump locked in today is an incredible economic victory for South Dakota producers,” Noem said.
Her office also included statements from Jerry Schmitz, a South Dakota soybean and corn producer and executive director of South Dakota Soybean and Craig Andersen, a South Dakota pork producer and board member of the National Pork Producers Council.
“The pioneer spirit lives on in South Dakota agriculture, and today’s agreement could very well be the new horizon we need to extend our operations and continue producing the food, feed, fiber, and fuel for the world,” Schmitz said.
Andersen applauded the administration.
“It’s no secret China is facing a pork shortage, and we urge China to support the purchase commitments it has made through this agreement,” he said.
Democrats in Congress aren’t happy about the deal.
Senate Minority Leader Chuck Schumer (D-NY) called it “an extreme disappointment.”
“(Trump is) conceding our leverage for vague, unenforceable ‘promises’ China never intends to fulfill,” Schumer said.
The U.S. Chamber of Commerce is looking for Phase 2 negotiations to begin as soon as possible.
“We hope this deal will usher in a new era of trust between both countries and pave the way for Phase 2 negotiations to begin in a timely manner,” said U.S. Chamber CEO Thomas J. Donohue in a statement.
How is China going to import $40 billion in ag products, when the most it ever has from the U.S. is $26 billion?
That’s the question many farmers want the answer to.
In addition to the $40 billion of food, agriculture and seafood goods promised for each of the next two years, the U.S. Department of Agriculture said China is hoping to import an additional $5 billion per year over the next two years.
The U.S. Farm Bureau said there is a lot of flexibility for the government to achieve that $80 billion total number, but challenges still exist. Especially because nearly 100 percent of U.S. agriculture exports still face tariffs.
“The tariffs, despite the agreement reached today, will remain in place,” the organization said in an analysis posted Wednesday.
That issue, plus the fact the most China ever purchased in U.S. ag exports was $26 billion in 2012.
The Farm Bureau has a few paths for China:
- The $40 billion number doesn’t just include regular agriculture products. According to the U.S. Trade Representative’s office, it will include distilled spirits, ethanol, biodiesel, forest products and fish products. If you combine all of those categories, history has still fallen short. The Farm Bureau calculates U.S. exports to China was $29 billion in 2013 for those groups.
- The U.S. will have to take away market share from other countries that export agricultural products to China.
- The U.S. will also need to export different types of products than it has in the past.
- An example of this is in the area of corn. Right now, corn is the 14th largest commodity exported to China. That could jump if China decides to focus on ethanol.
How else will this trade deal impact agriculture?
Protections are being built-in about biotechnology. The country has agreed with the U.S. to implement a “transparent, predictable, efficience, science- and risk-based regulatory process around this.
The USDA is also saying the progress in intellectual property will help the ag industry.
“The Intellectual Property (IP) chapter addresses numerous longstanding concerns in the areas of trade secrets, pharmaceutical-related intellectual property, geographical indications, trademarks, and enforcement against pirated and counterfeit goods,” the USDA said in a statement.
Secretary of Agriculture Sonny Perdue said this will level the playing field for U.S. farmers.
“This agreement is proof President Trump’s negotiating strategy is working. While it took China a long time to realize President Trump was serious, this China Phase I Deal is a huge success for the entire economy. This agreement finally levels the playing field for U.S. agriculture and will be a bonanza for America’s farmers, ranchers, and producers,” Perdue said in a statement.
The USDA provided several other breakdowns by commodity:
China will expand the scope of beef products allowed to be imported, eliminate age restrictions on cattle slaughtered for export to China, eliminate unnecessary cattle traceability requirements, and provide for the establishment of maximum residue levels for three hormones legally used in the United States.
China has agreed to broaden the list of pork products that are eligible for importation to include processed products such as ham and certain types of offal. China also agreed to conduct a risk assessment for the veterinary drug ractopamine, which may be used in U.S. beef and pork production
On November 14, 2019, China reopened its market to U.S. poultry meat, partially eliminating the ban it had imposed in late 2014. The U.S. Department of Agriculture (USDA) and China’s customs administration have completed necessary technical details, and Chinese importers can import U.S. poultry meat slaughtered and processed after being listed on the website of the General Administration of Customs of the People’s Republic of China (GACC).
China will immediately recognize USDA oversight of U.S. meat, poultry meat, and processed meat and poultry meat facilities, thereby eliminating any unique registration requirements and allowing imports of products accompanied by USDA certificates
Live Cattle for Breeding
Through this Phase One agreement, China will immediately engage in technical discussions for the import of U.S. live cattle for breeding
Dairy and Infant Formula
China has committed to streamline the timelines and procedures for registering U.S. dairy and infant formula facilities and products and to provide regulatory certainty and market stability for products like fluid milk and dairy permeate powder.
“China has not played by the rules for too long, and I thank President Trump for standing up to their unfair trading practices and for putting America first,” Perdue said. “We look forward to exporting to Chinese customers hungry for American products.”