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Agriculture Hopes For A Win As US And China Prepare To Sign Phase One Trade Deal

Soybeans, shown here during harvest 2018, were among the U.S. ag exports hurt most by Chinese retaliatory tariffs.

The first phase of a new trade agreement between the United States and China is scheduled for a White House signing ceremony Wednesday and many in the agriculture community are hoping the deal will bring some relief to the farm economy.

The Phase One agreement will begin to resolve the nearly two year exchange of tariffs the two countries have levied on each other’s goods—the United States in an attempt, the Trump administration says, to pressure China to reform some of its trade policies and China in retaliation.

The result for farmers was a steep decline in sales to China for many products, especially soybeans.

The Phase One deal will rescind some, but not all, of the tariffs and calls upon China to increase its imports. But for now, most details of the agreement have not been made public and Wendong Zhang, an Iowa State University economist, says the Chinese have not been particularly forthcoming with what they’re agreeing to.

Zhang offers as an example that he can’t find any confirmation as to whether China’s promise to purchase between $40-50 billion in U.S. agricultural products is for one year, which would be a huge increase over 2017, or if it’s for two years.

“Even if we get $50 billion for two years, that will be [a significant] improvement over what we have now,” he said. “So when you look at the market, there is a lot of hope that the Phase One deal, although it doesn’t address the bulk of the trade war, addresses most of the concerns the agricultural community has.”

Some of those bigger trade issues include technology transfer, intellectual property and financial services. Many industries have been stymied by the tariffs, but farmers have been a very visible and vocal group whose businesses, in many cases, were already strained before the trade war began.

Despite considerable hype around the planned signing ceremony, some farmer advocates remain skeptical. Farmers for Free Trade issued a statement saying the failure to publicly release the full text of the Phase One agreement has heightened its concerns about what’s in the deal.

Sen. Chuck Grassley, R-Iowa, calls the deal a win for President Donald Trump and says the market should reflect pretty quickly whether China is making good on its promises.

If the Chinese resume purchases of farm goods, then the federal government won’t need to make additional payments under the Market Facilitation Program, which shelled out nearly $11 billion to farmers to make up for lost sales, Grassley said. He didn’t have any official word about the Market Facilitation Program’s future, but said common sense would dictate there wouldn’t need to be future payments if trade gets back on track.

“The presumption of Market Facilitation was to make up for what the farmers lost because of the government imposing tariffs and China’s reaction to that,” Grassley said.

The two countries are expected to continue trade negotiations and Grassley said it’s unlikely the trade war would reach a complete armistice before the November general election in the United States.

Follow Amy on Twitter: @AgAmyInAmes

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