Coronavirus outbreak could prompt China to keep promises to buy US agriculture

Coronavirus epidemic may have unexpected effect on helping the United States ensure that China keeps its promise to buy $ 40-50 billion in US agricultural products over two years because she will need food.

Beijing has pledged to buy agricultural products as part of a global commitment to buy $ 200 billion in US goods and services, a key part of the "phase one" trade deal. "that he signed with the White House in January. He has made similar promises in the past with various US administrations, but to back down later. However, the coronavirus epidemic may be hurting domestic production enough that China needs these American agricultural products more than it has ever done before.

The main problem caused by the coronavirus for the international economy has been the disruption of Chinese production and the corresponding effect that has had on companies that depend on Chinese exports, noted international trade lawyer Chris Swift at Foley Lardner. The story is different for those who export to China. "If their own domestic production is problematic due to the disruption they have suffered, they may in fact need to buy products from (the United States)," said Swift.

Derek Scissors, resident researcher at the nonprofit organization, the American Enterprise Institute, said that although the virus can cause economic problems in the United States in other areas, Agriculture was probably not one. "The underlying Chinese demand for American agricultural products may actually be higher due to the crisis," he said.

China’s manufacturing output has dropped dramatically since the virus epidemic, Manufacturers Purchasing Managers Index released Friday night showed.

Factory closings and travel restrictions due to the virus have also hampered the transportation of goods to and from China. The capacity of the main Chinese ports has been at least 20% lower than normal, according to the Shanghai International Shipping Institute, a Beijing-based think tank. The effects of the backlog are expected to persist even if the epidemic is contained in the coming weeks.

The situation has prompted speculation that China will not follow up on the purchases, noted Inu Manak, a trade policy expert with the nonprofit organization Cato Institute. "While China has started with agreed tariff reductions, its ability to meet its purchase commitments is unclear," she said.

But even if trade has slowed, the United States and China are right to prioritize agricultural sales over other trade. China will need the food and the administration is impatient to sell it. Beijing understands the importance of purchasing agricultural products from the White House and does not want to risk the administration raising American tariffs again, said Gary Hufbauer, non-resident senior researcher at the Peterson Institute for International Economics. "I think China will do everything it can to reach the target on agricultural products, even if that will mean a drastic reduction in purchases of agricultural products from Australia, Brazil and others exporters, "he said.

Beijing targeted U.S. agriculture for retaliation for the 2019 trade war with the U.S., reducing purchases of pork and soybeans, among other products mainly produced in the states that had supported President Trump during the 2016 elections. China bought about $ 20 billion in US agricultural products a year before the trade war, which accounts for about 15% of all agricultural exports. After the administration's trade struggle began in 2018, agricultural exports to China have dropped to just $ 8 billion. The reprisals may have cost the Republican Party five seats in the House in the 2018 elections.

The administration has since touted $ 40-50 billion in purchases of good agricultural products, but it also closely monitors Beijing. The administration has offered to increase the budget for the office of the US trade representative in part to ensure that Beijing complies with the agreement.

Trump has promised additional agricultural aid to the agricultural industry, if necessary. In an uppercase tweet last week, the president said aid would come "until trade agreements with China, Mexico, Canada and others come fully into play. force ".

Trump seemed optimistic about the situation on Thursday, telling reporters that he had recently had a "long talk"with Chinese President Xi Jinping." He works really hard. He wants it to move away from China and disappear quickly, and he wants to resume business as usual, "said the president.