US and China sign ‘phase one’ of new trade deal

By Beth Newhart

- Last updated on GMT

Dairy organizations have agreed that negotiations with China are not complete "until the retaliatory tariffs against all US dairy exports are fully lifted." Pic: Getty/tupungato
Dairy organizations have agreed that negotiations with China are not complete "until the retaliatory tariffs against all US dairy exports are fully lifted." Pic: Getty/tupungato

Related tags China Trade Trade deal Infant formula tariffs

After coming to a verbal trade agreement in December, President Donald Trump and General Secretary Xi Jinping signed the first installment of the deal on Wednesday.

According to the Office of the US Trade Representative (USTR), China has agreed to increase imports of US goods and services by at least $200bn over the next two years.

December’s verbal deal​ blocked the implementation of tariffs on about $160bn of consumer goods from China that were to go into effect from the US on December 15. Phase one will provide US farmers and dairy companies “expanded access to China’s rapidly growing market for imported dairy and infant formula products.”

“As incomes rise in China, consumption of animal proteins such as dairy products is becoming more popular among Chinese consumers. In particular, demand for imported dairy and infant formula products from abroad is growing at a rapid rate,”​ USTR said.

The US believes exports have been limited by ‘restrictive’ Chinese regulatory requirements, but the new deal will help facilitate the trade of dairy products like extended shelf life milk, ultra-filtered milk and dairy permeate powder for human consumption in China.

Highlights and pitfalls for dairy

For the dairy industry, a few of the highlights of phase one are that China has agreed to recognize the US system of oversight for dairy products as providing the same level of protection as China’s. This will eliminate the need for China-specific inspections of US dairy facilities.

China will also allow ovine and caprine origin dairy product imports from the US, which were previously prohibited. And they will not not require on-site inspections or audits as a prerequisite to registering either a US dairy or infant formula facility.

The official Twitter account of the USTR said, “Donald Trump has concluded a high-quality, fully-enforceable Phase One trade agreement with China that begins to rebalance the trading relationship and achieves enforceable commitments to resolve structural issues.

“The US and China have reached an historic and enforceable agreement on a Phase One trade deal that will bring structural reforms to China’s economic and trade regime in the areas of IP, agriculture, financial services, and tech transfer.”

The dairy industry is largely backing the deal, considering it a good step forward and encouraging, but not enough to completely absolve the financial burden farmers have been facing for several years.

The US Dairy Export Council (USDEC) and the National Milk Producers Federation (NMPF) agreed that “the benefits for the dairy industry remain unclear,” ​and that the work with China “is not complete until the retaliatory tariffs against all US dairy exports are fully lifted.”

The two groups pointed out that how exactly China will fulfill its commitment to purchase large quantities of US agriculture products is yet to be resolved. They said US dairy exports to China totaled $377m in sales in 2019, but retaliatory tariffs contributed to a 47% decline in US exports to China in the same period.

Comment from US dairy

Tom Vilsack, president and CEO of USDEC, said, “Today’s announcement of a deal that makes progress on regulatory restrictions and other nontariff barriers hindering dairy trade is a positive step forward.

“These are important deliverables that USDEC has been pressing China for over the course of the last few years.We need to continue to work with our government, China’s government and our customers to finish the job by lifting the remaining Chinese retaliatory tariffs against our exports.”

Randy Mooney, Chairman of NMPF, said, “America’s dairy farmers have been disproportionally ​[sic] harmed by China’s retaliatory tariffs, and we cannot ask our farmers to continue operating under this financial uncertainty.

“We appreciate the hard work invested by both the US and Chinese governments, but we urge China to swiftly lift all retaliatory tariffs against US dairy products and work with US suppliers to fulfill their purchasing commitment.”

Brody Stapel, president of the Edge Dairy Farmer Cooperative, said, “Given the massive potential China has as an export market for dairy farmers and processors, a trade agreement that increases our opportunities there is a positive step.

“The deal does not address retaliatory tariffs China has placed on our dairy products. It is important that removing these tariffs be part of subsequent agreements. We appreciate the administration’s commitment to making sure our country gets a fair shake, and we hope dairy is a top priority in further negotiations with China.”

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