Issue:
Trade concern with China, the number 2 export market for U.S. agriculture, has become a daily news item and agriculture commodities are front and center.
Background:
On March 23, new tariffs on steel and aluminum imports into the U.S. went into effect. President Trump's tariff decision is due to concerns over Chinese practices that impact U.S. intellectual property. The tariffs apply to all exporters of steel and aluminum (a few exceptions) although China is the clear target. China is the largest producer of steel and aluminum in the world. China doesn't export much steel to the U.S., but does export significant aluminum.
The U.S. actions were taken under Section 232 of the Trade Expansion Act of 1962, which gives the executive branch the ability to conduct investigations to "determine the effects on the national security of imports." This is critical because under the General Agreement on Tariffs and Trade (GATT) Article XXI Security Exceptions, a country can unilaterally suspend trade benefits it extends to other countries if it deems that imports are posing a national security threat.
In response to the U.S. action, China notified the World Trade Organization on March 29 that it would begin increasing tariffs on some products from the United States because it did not believe our government was acting in the name of national security. China said the United States was increasing tariffs on steel and aluminum as a "safeguard" measure. The distinction is important because the procedures for taking action against a trade partner under the Safeguards Agreement are significantly different from those that may be taken if trade actions are taken under the National Security Exemption. In its WTO notification, China included the list of U.S. products that, beginning April 2, would face higher tariffs when entering China to serve as partial compensation for the WTO rights upon which China believes the U.S. is infringing.
China's retaliation list includes 128 items, 94 are agricultural in nature; the remainder are steel and aluminum. The agricultural lines are divided into two categories - 86 products that will be subject to an additional 15 percent tariff and eight products that will be subject to an additional 25 percent tariff. These new tariffs are in addition to existing tariffs. For example, a Chinese importer of U.S. frozen pork paid a tariff of 12 percent before April 2. The new tariff will be 37 percent on the same U.S. product. Frozen pork products from the European Union, Canada, Brazil, Chile and other international competitors will continue to pay a 12 percent tariff. The U.S. competitive position will quickly deteriorate in these conditions.
Three of the top 10 agricultural products the U.S. shipped to China in 2017 are on the list - pork ($663 million), tree nuts ($242 million) and fresh fruit ($225 million).
On April 3, 2018, the Office of the U.S. Trade Representative (USTR) released a list of $50 billion of Chinese electronics, machinery and aerospace products for a recommended twenty-five percent import tariff. As trade tensions escalate, a public comment and hearing process will occur before these tariffs can be imposed. Public comments on the recommended tariffs are due to USTR by May 11. A hearing will be held on May 15. Post-hearing comments are due May 22. The Administration then has 180 days in which to make a decision.
In response to the April 3 U.S. recommendation of tariffs, within hours China released a list of products for a potential twenty-five percent retaliatory tariff. These include soybeans, beef, sorghum and airplanes. China's potential tariffs on these items will not go into effect until the U.S. potential tariffs go into effect.
Following the release of China's $50 billion retaliatory list, President Trump indicated he is considering imposing an additional $100 billion in tariffs. The President is saying he has instructed USDA Secretary Perdue to devise a plan to protect farmers and other agricultural interest.
The U.S exported about $130.4 billion worth of goods to China in 2017 while we imported $505.6 billion worth of Chinese goods into the U.S.
Status:
The trade disputes are placing farmers in an incredibly difficult position just as many planting decisions are being placed into action. Farm Bureau is urging the United States and China to return to negotiations and produce an agreement that serves the interests of the world's two largest economies. |
