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January 22, 2020
U.S.-China Phase I Deal: Agriculture
On January 15, 2020, President Trump signed a “Phase I”
Between the United States of America and the People’s Republic of China Text,
executive agreement (that does not require congressional
January 15, 2020.
approval) with the Chinese government on trade and
Other Measures
investment issues, including agriculture. This marks at least
the temporary resolution of a dispute that began when the
China agreed to improve the transparency of its
United States imposed tariffs on a wide range of Chinese
domestic agricultural support measures.
exports in 2018, and China retaliated with tariffs on almost
China agreed to implement a transparent, predictable,
all U.S. agricultural products and certain other goods.
efficient, science- and risk-based regulatory process for
the evaluation and authorization of products of
Under the agreement, China will not repeal any tariffs but
agricultural biotechnology.
will grant tariff exclusions for various agricultural products
in order to reach a target level of U.S. imports. The
The United States and China agreed to implement and
agreement is expected to improve market access for U.S.
require science- and risk-based food safety regulations.
agricultural products. The value of U.S. agricultural exports
China will improve its food safety measures to facilitate
to China was far lower in 2018 and 2019 than in 2017 due
exports of U.S. food and agricultural products to China.
to the retaliatory tariffs imposed by China (see CRS Report
China will improve access for U.S. beef products,
R45903, Retaliatory Tariffs and U.S. Agriculture). Key
including eliminating age restrictions on cattle
provisions of the agreement are discussed below.
slaughtered for export, eliminating traceability
Trade Commitments
requirements, and establishing maximum residue levels
for three hormones legally used in the United States.
China agreed to import $32 billion worth of additional
U.S. agricultural products (relative to a 2017 base of $24
China agreed to broaden the list of pork products that
billion) over a two-year period (Figure 1). It will
are eligible for import and to conduct a risk assessment
achieve this by excluding those products from tariffs.
for the veterinary drug ractopamine, which is allowed in
Products mentioned in the agreement include oilseeds,
U.S. beef and pork production.
meat, cereals, cotton, and seafood. China has not
China agreed to adopt poultry import regulations
committed to tariff exemptions or import levels for any
consistent with World Organization for Animal Health
specific products.
(OIE) Terrestrial Animal Health Code. In November
China agreed to improve its tariff-rate quota (TRQ)
2019, China reopened its market to U.S. poultry after an
administration of wheat, corn, and rice as per its
import ban since 2014, imposed after an outbreak of
obligations under the World Trade Organization (WTO).
avian influenza in some U.S. regions. The OIE protocol
In April 2019, the WTO ruled in favor of the United
requires banning products from regions or states
States in a dispute regarding China’s TRQ
affected by the outbreak; China had banned poultry
administration. Changes in China’s TRQ administration
from the entire United States.
are expected to improve market access for U.S. grains.
China will implement the U.S. Department of
Figure 1. China’s Agriculture Import Commitments
Agriculture (USDA) Public Health Information System,
an electronic system to notify export health certificates
(in billions of U.S. dollars)
to an importing country in advance of shipment arrival.
China will immediately engage in technical discussions
to import U.S. live cattle for breeding.
China committed to streamline procedures for
registering U.S. dairy and infant formula facilities and
products and to provide regulatory certainty and market
stability for such products.
China committed to authorize the import of U.S. rice
from any USDA-approved rice facility.
China agreed to approve the import of 26 aquatic
species requested for export by the United States. China
has also committed to streamline procedures for
registering U.S. seafood facilities and products.
Sources: CRS using U.S. Department of Agriculture (USDA), Foreign
Agricultural Service (FAS) data covering agricultural and related products,
China agreed to finalize phytosanitary protocols for U.S.
and Office of U.S. Trade Representative, Economic and Trade Agreement
avocadoes, blueberries, potatoes, California nectarines,
barley, alfalfa pellets and cubes, almond meal pellets
and cubes, and hay. In exchange, the United States
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U.S.-China Phase I Deal: Agriculture
agreed to complete its regulatory notice process for
exports to China combined with abundant domestic and
imports of Chinese fragrant pear, citrus, and jujube, and
international supplies of grains and oilseeds contributed to
to complete a phytosanitary protocol for bonsai,
relatively weak U.S. agricultural commodity prices and
excluding orchids.
uncertainties regarding farm income, and triggered a USDA
China agreed to immediately update its list of
aid package to farmers affected by the Chinese tariffs in
traditionally traded feed additive products with 23 U.S.
2018 and 2019.
products and to streamline the registration process for
Facing higher Chinese tariffs, U.S. exporters sought to
feed additives, premixes, and compound feed.
develop new markets in 2018 and 2019. Brazil and other
China agreed to speed up license renewals for distillers’
U.S. agriculture competitors took the opportunity to
dried grains with solubles manufacturers.
strengthen their relationships with Chinese importers.
China agreed to resume imports of pet food containing
poultry ingredients and to lift its ban on ruminant
The U.S.-China Phase I agreement is expected to provide
ingredients. China also committed to streamline the
improved opportunity for certain U.S. exporters; however,
timelines and procedures for registering U.S. pet food
it may not create notable new market demand. Instead, the
manufacturing facilities.
Phase I agreement may produce a rearrangement of trading
patterns between China and its various import suppliers.
China agreed to not undermine market access for U.S.
For example, for the United States to meet the full
exports using trademarks and generic terms through any
commitment of an additional $32 billion in agricultural
geographical indications (GI) measures taken in
exports to China over two years likely would require both
connection with an international agreement. This limits
diverting U.S. exports to China from other markets and
China’s ability to prevent imports of U.S. products that
China substituting some imports from its current sources
may have a GI trademark in another country with which
with products from the United States. If the principal result
China has a trade agreement.
of the Phase I agreement does not add “new” demand to the
The United States and China agreed to continue their
international marketplace, then market price effects of this
Scientific Cooperation and Exchange Program on
switching may be minimal. Moreover, the United States and
agriculture-related issues.
China acknowledge that purchases of additional U.S.
Market Implications of China’s Import
agricultural products will depend on market conditions
Commitments
(Chapter 6, Article 6.2.1). Therefore, additional U.S.
agricultural exports to China may fall short of the target of
U.S. exports to China of agricultural products that China
$32 billion over two years.
has committed to purchase under the Phase I agreement
declined 46% in 2018 (Figure 2) from 2017 levels. In 2018,
U.S. exports to other countries increased. Lower U.S.
Figure 2. U.S. Agricultural Exports Since 2017
(in billions of U.S. dollars)
Sources: CRS using USDA, FAS, based on U.S. Census Bureau Trade Statistics, Product Group BICO-HS-10, January 13, 2020, at
https://apps.fas.usda.gov/gats/default.aspx.
Notes: The figure includes agriculture and related products found in Chapters 1-24 of the U.S. Harmonized Tariff Schedule, essential oils
(Chapter 33), raw rubber (Chapter 40), raw animal hides and skins (Chapter 41), and wool and cotton (Chapters 51-52). Additionally, data
include major products derived from plants or animals that are not considered agricultural because of their manufactured nature, such as cotton
thread and yarn; fabric, textiles and clothing; leather and leather articles of apparel; cigarettes and cigars; and spirits.
Anita Regmi, Analyst in Agricultural Policy
IF11412
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U.S.-China Phase I Deal: Agriculture
Disclaimer
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