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7 Jan, 2020 14:51

Is Beijing backpedaling on key issue of US-China trade deal?

Is Beijing backpedaling on key issue of US-China trade deal?

China’s annual quotas for corn, wheat and rice will remain unchanged, the country’s senior agriculture official has reportedly said. The news comes days before the first part of the US-China trade agreement is due to be signed.

“They are quotas for the whole world. We will not change them just for one country,” Vice Minister of Agriculture and Rural Affairs Han Jun told Chinese news outlet Caixin.

As part of the breakthrough trade deal reached between the two sides last year, China promised to significantly boost purchases of American goods, including farm products critical to the US, over the next two years. Han himself was a part of the negotiating team, and said at the time that China would buy more wheat, rice and corn from the US - but did not elaborate on the exact amount.

While Washington welcomed the pledge, some Chinese producers were reportedly concerned that the government could cancel the quotas it had set for years.

However, the quotas for the aforementioned crops have never been fulfilled in recent years and there is much room for a significant rise in imports within the existing numbers, the report notes. Chinese customs data shows the country imported around three million tons of each crop in 2018, while this year’s quotas for wheat, rice and corn stand at 9.6 million, 5.3 million, and 7.2 million tons respectively. Even before the trade war broke out, China’s purchases of the three grains from the US amounted to around $534 million - much lower than the limits imposed by the quotas. 

Meanwhile, some analysts believe the decision could still affect the shaky trade truce, as China’s quota system has been a bone of contention both in the trade talks between the world’s two biggest economies and beyond. For example, a WTO panel ruled last year that China’s quota system for rice, wheat and corn violated international trading rules. 

“I’ve always thought US$40 billion [per year] would be difficult. I don’t think it makes it dramatically more difficult, but it limits the options further if imports for wheat, corn and rice will still have hard quota limits,” Darin Friedrichs, senior Asia commodity analyst at INTL FCStone, said as cited by the South China Morning Post.

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The analyst explained that, based on current prices, the total import quota would allow for the import of an additional $1.26 billion worth of corn and $2.32 billion of wheat in 2020. These import figures don’t differ much from previous years, and Friedrichs noted that they cover all Chinese imports of these grains, not just those from the US.

China is reportedly set to send its trade delegation, led by Vice Premier Liu He, to the US on January 13. The team was meant to travel to Washington sooner, but had to rearrange the trip after US President Donald Trump tweeted last week that he would sign the Phase 1 trade deal with China on January 15.

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