Phase One Deal With China Falling Victim To Pandemic, Politics

Harvest Public Media | By Amy Mayer

Published June 5, 2020 at 4:31 PM CDT

In January, farmers had great hopes for this year's soybean exports to China. But the Phase One trade deal is floundering. These beans are growing in central Iowa.

In January, amid much fanfare and optimism, China and the United States signed phase one of a trade deal intended to be the first step toward ending the nearly two-year-old trade war. In the agreement, China agreed to increase its purchases of agricultural products by $32 billion over the next two years.

Then came the COVID-19 pandemic and the corresponding hit to the global economy, which led to lower prices for commodities like soybeans, one of the things China buys from the United States.

With the deal’s goals written in dollars, not volume, Steve Nicholson, an analyst with Rabo Agri-Finance in St. Louis, says the terms have become more complicated.

“If you’ve promised to take $36 billion worth of goods and commodity prices are going down, that just makes [it] very, very difficult for that to happen,” he said.

What’s more, June kicked off with China pausing state-owned companies’ imports of U.S. soybeans and pork. The move was in response to the United States attempting to punish China’s crackdown on Hong Kong by revoking special trade status for the semi-autonomous city.

“So you’ve got these two channels going where you have sort of the yin and yang and then on top of that you’ve got all the coronavirus rhetoric as well happening,” Nicholson said, referring to how some in the Trump administration have referenced the Chinese role in the global pandemic and the related U.S. withdrawal from the World Health Organization. “It just makes it very difficult for trade relations to continue.”

But Sen. Chuck Grassley, R-Iowa, says disagreements over the coronavirus or the way Beijing exerts its control over Hong Kong should not get caught up in the existing trade agreement.

“I don’t see that conflation, [it] shouldn’t be there,” he said, “and I’m not worried about the trade agreement. I still have confidence that China is going to meet their responsibilities.”

Others are not as optimistic.

“China Phase One Trade Deal Looks Mighty Dead,” opined one writer in Forbes and a Foreign Policy article declared, “China Puts the Final Kibosh on Trump’s Trade Deal.”

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