COVID-19 relief legislation took top priority for the Biden Administration’s first two months, but as stimulus programs begin to take effect President Biden and Congress will turn to other issues.
Trade could be a key topic for U.S. agriculture. How will the new administration and a power change in Congress affect trade deals?
Farm Press asked Extension economists Aaron Smith, University of Tennessee Institute of Agriculture, and John Robinson, Texas A&M AgriLife, to weigh in on the challenges and opportunities facing the Biden Administration and Congress.
With a new administration and new trade negotiators, how will the trade dispute with China change, if at all?
AS -- There is a great deal of uncertainty, but in the short term it seems unlikely that the U.S. will want to do major renegotiations or revisions to the existing trade deal. The current administration is focusing on COVID-19. Once the U.S. is beyond COVID, the administration will likely turn to domestic issues for the next two years. These are likely to include: negotiating a new farm bill and environmental/climate change policies.
China has been buying large amounts of agricultural products and commodities from the U.S., but also from other countries (Canada, Brazil, the EU). There’s a real strong demand pull from China right now.
Information out of China always should be interpreted cautiously; however, the large ag purchases likely result from a combination of factors: African Swine Fever (ASF) related hog herd rebuild, decreased domestic production/over estimation of stocks, consumer demand from the large and expanding middle class, stockpiling key commodities, and China food security policies.
What comes after the Phase One trade agreement is a huge unknown?
Extension economist John Robinson, Texas A&M AgriLife. (Photo courtesy of Texas A&M AgriLife)
JR --The best answer is, I don't know. With nothing to back me up, I am inclined to think that the Chinese were going to do what they thought was in their best interest (buying cotton at low prices) regardless of their Phase One obligations. They happen to coincide, but that's just a coincidence. With nothing to back me up, I expect the Biden Administration will be less stringent/tough on China, which only reinforces my first statement.
The issue seems likely to change from the Phase One issue to the Xinjiang human rights issue. The U.S. currently has a ban on cotton and cotton products from Xinjiang, where 85% of Chinese cotton is harvested. Assuming the ban in enforced and comprehensive, China may have to import even more foreign cotton to run their textile/apparel export industry.
Is the Biden Administration likely to push for new negotiations with China, turn back to a pre-Trump posture of maintaining a harder line with China?
AS -- There will need to be new negotiations. How these occur and how they are initiated will be critical to agriculture moving forward. Unfortunately, there is not much being said now.
JR -- I am not at all sure, but I don't expect them to be as hard/tough as Trump. I think they will be more nuanced, but whether that is effective or not remains to be seen.
How about the U.S. – Mexico - Canada Trade Agreement? Will that change at all?
AS -- There are some issues right now with Canada’s poultry and dairy Tariff Rate Quotas (TRQ) compliance that will likely be pushed by the USDA. Secretary Vilsack is well versed on issues with U.S. dairy access to Canadian markets through his former position at the U.S. Dairy Export Council. Also issues with Mexico banning GMOs will need to be addressed.
Some compliance disputes and access discussions will occur, but with other more pressing trade negotiations, it seems unlikely a USMCA overhaul will be a priority in the next few years.
JR-- I would expect USMCA to be as beneficial to U.S cotton as NAFTA was ... most immediately in supporting Mexican demand for imports of U.S. cotton.