Iowa farmers can’t seem to catch a break.
Last week, China Beige Book chief executive officer Leland Miller told Bloomberg News the Phase One trade deal with China is in “a very difficult position” with the Trump administration getting tough on Beijing.
Previously, President Donald Trump indicated Phase Two was unlikely, while blaming Chinese “malfeasance” for instigating the global coronavirus pandemic.
Among the groups most loyal to the president, farmers became retaliatory targets when he imposed tariffs against friends and foe alike while seeking to rewrite trade deals. The battle with China lasted nearly two years before the “Phase One” pact in January.
China agreed not to compel foreign firms to turn over technology, allow some intellectual-property protections, and remove onerous restrictions on farm imports.
It also agreed to buy $200 billion in U.S. products by the end of 2021, including $36.6 billion in agricultural purchases this year. Trump envisioned “$50 billion,” advising farmers to “get bigger tractors” to meet the demand.
But purchases have lagged far behind schedule. In June, White House trade adviser Peter Navarro said Phase One was “over,” but Trump quickly tweeted it “was fully intact.”
Then China decided to dismantle Hong Kong’s “One Country, Two Systems” status — a measure of autonomy enjoyed by the former British colony to last 50 years when handed over to China in 1997.
China responded to ongoing demonstrations by purging Hong Kong history texts, banning pro-democracy slogans and songs, arresting opposition leaders, detaining peaceful protestors and installing secret police.
Secretary of State Mike Pompeo called it the “death knell” for Hong Kong autonomy, putting special trading privileges at risk. Last year Congress mandated that the State Department must certify Hong Kong as “sufficiently autonomous” to justify tariff exemptions on $38 billion in trade.
The U.S. ordered the Chinese embassy in Houston closed, and China shuttered the U.S. embassy in Chengdu.
Pompeo declared 50 years of engaging China had failed, that Chinese President Xi Jinping is a “true believer in a bankrupt, totalitarian ideology.” “We must induce China to change,” he said, adding, or “Communist China will surely change us.”
Once again, Iowa farmers — second to Illinois in soybean exports, but first in pork and eggs —are in the cross hairs after two years of huge financial losses and shifting trade partnerships.
In May, a National Bureau of Economic Research report found “soybeans and meat products experiencing the most considerable redistribution effects” from trade retaliation.
“Losses in foreign trade with retaliatory countries outweigh the gains from trade with non-retaliatory countries by more than $14.4 billion,” it stated. “Our results also indicate that non-retaliatory countries accommodated the increased demand from retaliatory countries by reorienting their trade relationships. We find that countries in South America and Europe benefited the most from these adjustments gaining more than $13.5 billion in additional foreign sales.”
To help offset losses, the administration provided farm interests, including investors, a $12 billion aid package in 2018 and $16 billion in 2019. They got another $23 billion in coronavirus-related legislation.
China had been the biggest buyer of U.S. soybeans and second to Mexico in pork purchases.
In 2017, the U.S. exported $24 billion in agricultural products to China. Soybeans amounted to $12.2 billion or 52% of its U.S. purchases, while pork was 5%. During the trade war, soybeans plummeted to $3.1 billion in 2018,improving to $8 billion last year.
Phase One got off to a slow start with $1.2 billion in Chinese soybean purchases between January and April, according to the U.S. Department of Agriculture. Farm groups correctly complained China was favoring Brazil.
“China is light years from the pace of ag commodities they need to buy each month to reach the $36.5 billion commitment for 2020,” Pro Farmer policy analyst Jim Wiesemeyer wrote in June. “Will they reach it? I seriously doubt it. … I expect China will renege on the 2020 Phase 1 commitment. … By early August it will be clear to all.”
As former National Security Adviser John Bolton wrote in “The Room Where It Happened,” Trump was desperate to make the trade deal now unraveling.
At a December 2018 dinner with Xi, Trump offered to reduce U.S. tariffs in exchange for “increases in Chinese farm-product purchases, to help with the crucial farm-state vote.”
Six months later, Bolton claimed Trump told Xi a “trade deal with China” would “be a big plus for him politically,” later “pleading with Xi to ensure he’d win.” The White House rejected the accounts.
China is making its opposition to Trump clear. A 25-year, $400 billion “investment” deal with Iran disregarded U.S. sanctions imposed after Trump pulled out of the multinational nuclear accord.
Farm groups worked hard to cultivate trade pacts and partnerships. Regrettably, whenever it seems there’s a light at the end of the tunnel, it goes dark again.
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