Some Chinese trade advisers are arguing that Beijing should invalidate the Phase One trade agreement that de-escalated the Sino-U.S. trade war as retaliation for a U.S. coronavirus blame campaign, reported a state-controlled Chinese newspaper on Monday. The agreement obliges China, formerly the top customer for U.S. ag exports, to buy roughly $40 billion a year of American food, agricultural and seafood products.

The newspaper, Global Times, quoted a trade adviser as saying: “It is, in fact, in China’s interests to terminate the current Phase One deal.” Trade hawks view the agreement that took effect in mid-February as tilted toward the U.S. However, analysts viewed termination as a last option that would be utilized only in extreme circumstances, said the newspaper, published by the People’s Daily, the official news organ of China’s ruling Communist Party.

This is “mostly saber rattling in response to (President Trump’s) saber rattling,” said Joe Glauber, senior research fellow at the IFPRI think tank and former USDA chief economist. Trump has suggested additional tariffs on Chinese products are an option, and he said over the weekend that he was “not decided” on the future of the agreement, one of his major trade achievements.

China has moved slowly on agricultural purchases this year. Analysts such as Glauber have noted that China prefers to buy at harvesttime – during the late summer and early fall in America – when prices are lower.

In the first three months of this year, China purchased $3.1 billion of agricultural products, far below the pace needed to meet the target for this year, said an analysis by the American Farm Bureau Federation. “A portion of the slower pace of exports is attributable to COVID-19 demand destruction,” said AFBF chief economist John Newton. “From now through the end of 2020, farmers, ranchers, and agribusinesses will continue to monitor U.S. agricultural exports to China.”

U.S. farm exports fell by 5.5% in fiscal 2019 as the trade war deepened. The USDA forecasts a mild, but not full, recovery this fiscal year. It estimated exports of $14 billion to China in fiscal 2020, compared to sales that averaged $21 billion annually before the trade war. The USDA will update its forecasts on May 29.

The Global Times reported “sources close to the matter” saying that Trump, criticized at home for an ineffectual response to the coronavirus, created a tsunami of anger in the trade community by blaming China for the pandemic. Trade hawks believe China has the upper hand because of the upcoming U.S. election and looming recession.

While some U.S. analysts are skeptical that China can fulfill its Phase One obligations, Chinese analysts told the Global Times that the coronavirus has reduced U.S. capacity to ship the volume of goods that China wants to buy.

“China has shown sincerity in the implementation of the Phase One trade pact,” said Global Times, pointing to large purchases of U.S. pork.

Only last week, Trump administration officials said, after consulting with Chinese Vice Premier Liu Hem “both countries fully expect to meet their obligations under the agreement in a timely manner.”

Source: Successful Farming – 12^th May 2020

Image by sean sheng from Pixabay