Trump Administration Claims on Farm Trade Progress Questioned
(Bloomberg) -- The Trump administration says China has met 71% of its farm-good purchases under the phase one trade deal. Whether that’s the most accurate way to measure the progress is still up for debate.
The U.S. government said Friday that China had purchased $23 billion in American farm products this year, but that amount includes both goods that have been shipped and also those sold but not yet exported. The figure is an “overly optimistic” gauge as some of the sales may only hit the water after the Dec. 31 deadline and the contracts may still be canceled, said Joseph Glauber, a former U.S. Department of Agriculture’s chief economist.
The report, which paints a rosier picture of the trade deal than export figures currently show, was released less than two weeks ahead of the elections. President Donald Trump, who has given billions of dollars in aid to farmers hurt by the trade war and the coronavirus pandemic, is counting on overwhelming support in rural areas across the Midwest farm belt to be re-elected.
“The number 71% is wishful thinking,” Glauber, who headed the USDA’s economic analysis under Republican George W. Bush and Democrat Barack Obama, said by phone. “I think the idea that all of that will occur in 2020 is highly unlikely, just based on previous years’ shipping patterns.”
China agreed to buy $36.5 billion in American agricultural products in 2020, up from $24 billion in 2017, the year before the trade war started. In the first eight months of the year, U.S. exports of agricultural goods and related products only reached $10.7 billion, still below 2017 levels, USDA data showed.
The U.S. Trade Representative said the agency had developed what it considered the best method possible for tracking actual agricultural purchases. Since export sales only cover about 80% of agricultural goods exported, the agency also adjusted the figure upwards to take into account other farm goods.
“Looking at simple import or export numbers alone is misleading because actual sales oftentimes lag exports by several months,” the USTR said. “This methodology has proven accurate and corresponds with the similar numbers China keeps.”
|Text of Phase One Deal|
|For the category of agricultural goods identified in Annex 6.1, no less than $12.5 billion above the corresponding 2017 baseline amount is purchased and imported into China from the United States in calendar year 2020, and no less than $19.5 billion above the corresponding 2017 baseline amount is purchased and imported into China from the United States in calendar year 2021;|
The USTR was never clear in the agreement about how it would calculate progress, but the text of the deal calls for product to be purchased and imported into China in 2020. If travel time is considered -- as much as a month from parts of the U.S. to China -- that may also rule out most of the December shipments.
“The agreement explicitly calls for the goods to be imported into China, so on its face, compliance would seem to require not just an outstanding sale, but also delivery within the calendar year,” said Seth Meyer, associate director at the University of Missouri’s Food & Agricultural Policy Research Institute and former chairman of the USDA’s World Agricultural Outlook Board.
China has purchased a record amount of corn from the U.S., while soybean sales for delivery in the 2020-21 season are running at their fastest pace in history. The USTR also highlighted record pork shipments and an increase in sorghum and beef exports.
“Are these good, positive sales? Absolutely,” Glauber said. “These are really positive numbers but if you’re looking at this phase-one deal, I think we will fall short. But it will be a good year.”
Also, some of the reported sales could still be canceled or postponed.
“There’s enough history of China not keeping commitments to create some skepticism of these numbers until the shipments occur,” said Arlan Suderman, chief commodities economist at StoneX. “That said, things are playing out pretty much as we expected six months ago, with a strong shipment program.”
©2020 Bloomberg L.P.