Does China use laws to invalidate commitments to the US in the first phase agreement?
Recently Deputy Minister of Agriculture and Rural Han Jun told China’s Caixin news agency that the country would maintain its annual import quota for corn, wheat and rice.
|Wheat is blocked with quotas, it is hard for China to buy up to 40 billion USD of American agricultural products.|
This quota sets the amount of wheat, corn and rice that can be imported at a 1% tariff.
Import volume for 2020 was announced in September 2019 and remains at the same level as the previous year. External import quotas are often rare due to tariffs of up to 65%.
China’s annual quota for wheat is 9.64 million tons, corn is 7.2 million tons, and rice is 5.32 million tons. However, this quota is rarely used because China relies on domestic production. Chinese customs data shows that China imported about three million tons per crop in 2018, which is far below the set quota. But to reach 40 billion USD of agricultural products as agreed, Beijing will be forced to break the quota.
China has been asked to buy an additional US $ 40 billion in US agricultural products, according to US President Donald Trump but with the latest quota from the Chinese Ministry of Agriculture, this commitment seems impossible.
The idea that China will change this quota to comply with US commitments. But Deputy Minister Han Jun said that this quota is provided for the international market. China will not adjust its quotas for any one country alone.
Moreover, due to its trade war with China, Beijing has moved to import agricultural products from many countries including Brazil, Russia, and Ukraine. Changing customers in the early afternoon as the trade agreement will probably further reduce the ability to buy US agricultural products.
Dar Friedrichs, senior Asia commodity analyst at INTL FCStone, told SCMP that it will be more difficult when China issues hard quotas for agricultural products such as wheat, maize and rice. This is not a major import product from the US but it reduces the options of Chinese buyers in the US market.
“I always thought the US $ 40 billion would be difficult. But it would be significantly more difficult when options were limited if importing wheat, corn and rice from the US” – Mr. Dar Friedrichs said.
The analyst explained that, based on current prices, the total import quota will allow an additional import of US $ 1.26 billion of maize and US $ 2.32 billion of wheat by 2020, which is too small for the reference. Donald Trump’s $ 40 billion expectation.
It is known that on 13 January, Chinese Deputy Prime Minister Liu He will come to the United States to prepare for the signing of the first-phase trade agreement. The delegation led by Liu He is scheduled to arrive earlier but has already arranged. re-planned after Trump’s tweet saying he would sign the deal on January 15.
In related developments, the US trade deficit has decreased by 8.2% stemming from imports that have decreased by US $ 2.5 billion while exports increased by US $ 1.4 billion since October 2019.
The latest figures show the overall deficit in 2019, witnessing a slight decrease of US $ 0.1 billion in exports in the first 11 months of the year while imports decreased by US $ 3.9 billion compared to the same period in 2018.
According to The Hill, the drop in the trade deficit will be welcome news for President Trump, who always thinks that the trade deficit is a sign of America’s weakness.
Economists still think that reducing the trade deficit is not good or bad for the prosperity of the economy. Some are concerned that the reduction in imports may indicate a “soft” of domestic demand, a key driver of economic growth.