U.S.-China Phase I Deal: Agriculture

U.S.-China Phase I Deal: Agriculture

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Updated February 7, 2020
U.S.-China Phase I Deal: Agriculture
On January 15, 2020, President Trump signed a “Phase I”
Agreement Between the United States of America and the People’s
executive agreement (that does not require congressional
Republic of China Text, January 15, 2020.
approval) with the Chinese government on trade and
Other Measures
investment issues, including agriculture. This marks at least
 China agreed to improve the transparency of its
the temporary resolution of a dispute that began when the
domestic agricultural support measures.
United States imposed tariffs on a wide range of Chinese
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. It is
agricultural biotechnology.
possible that China will grant tariff exclusions for various
 The United States and China agreed to implement and
agricultural products, lowering their prices to domestic
require science- and risk-based food safety regulations.
buyers in order to reach a target level of U.S. imports. The
China will improve its food safety measures to facilitate
agreement is expected to improve market access for U.S.
exports of U.S. food and agricultural products to China.
agricultural products. The value of U.S. agricultural exports
 China will improve access for U.S. beef products,
to China was far lower in 2018 and 2019 than in 2017 due
including eliminating age restrictions on cattle
to the retaliatory tariffs imposed by China (see CRS Report
slaughtered for export, eliminating traceability
R45903, Retaliatory Tariffs and U.S. Agriculture). Key
requirements, and establishing maximum residue levels
provisions of the agreement are discussed below.
for three hormones legally used in the United States.
Trade Commitments
 China agreed to broaden the list of pork products that

are eligible for import and to conduct a risk assessment
China agreed to import $32 billion worth of additional
for the veterinary drug ractopamine, which is allowed in
U.S. agricultural products (relative to a 2017 base of $24
U.S. beef and pork production.
billion) over a two-year period (Figure 1). It will likely

achieve this by excluding those products from
China agreed to adopt poultry import regulations
retaliatory tariffs. Products mentioned in the agreement
consistent with World Organization for Animal Health
include oilseeds, meat, cereals, cotton, and seafood.
(OIE) Terrestrial Animal Health Code. In November
China has not committed to tariff exemptions or import
2019, China reopened its market to U.S. poultry, which
levels for any specific products.
had been closed since 2014 after an outbreak of avian

influenza in some U.S. regions. The OIE protocol
China agreed to improve its tariff-rate quota (TRQ)
requires banning products from regions or states
administration of wheat, corn, and rice as per its
affected by the outbreak. China had banned poultry from
obligations under the World Trade Organization (WTO).
the entire United States.
In April 2019, the WTO had ruled in favor of the United
States in a dispute case regarding China’s TRQ
 China will implement the U.S. Department of
administration. Changes in China’s TRQ administration
Agriculture (USDA) Public Health Information System,
are expected to improve market access for U.S. grains.
an electronic system to provide export health certificates
to an importing country in advance of shipment arrival.
Figure 1. China’s Agriculture Import Commitments
 China will immediately engage in technical discussions
In Bil ions of U.S. Dollars
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.

 China agreed to finalize phytosanitary protocols for U.S.
Source: CRS using U.S. Department of Agriculture, Foreign
avocadoes, blueberries, potatoes, California nectarines,
Agricultural Service, data covering agricultural and related products,
barley, alfalfa pellets and cubes, almond meal pellets
and Office of U.S. Trade Representative, Economic And Trade
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
purchases rose but were still 32% below the 2017 level
imports of Chinese fragrant pear, citrus, and jujube and
(Figure 2). Lower U.S. exports to China combined with
to complete a phytosanitary protocol for bonsai,
abundant domestic and international supplies of grains and
excluding orchids.
oilseeds contributed to relatively weak U.S. agricultural
 China agreed to immediately update its list of
commodity prices and triggered a USDA aid package to
traditionally traded feed additive products with 23 U.S.
farmers affected by the Chinese tariffs in 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 during 2018 and 2019. Brazil and
 China agreed to speed up license renewals for distillers’
other 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
The U.S.-China Phase I agreement is expected to provide
poultry ingredients and to lift its ban on ruminant
improved opportunity for certain U.S. exporters. However,
ingredients. China also committed to streamline the
it may not create notable new market demand. Instead, the
timelines and procedures for registering U.S. pet food
Phase I agreement may produce a rearrangement of broader
manufacturing facilities.
trading patterns between China and its various import
 China agreed to not undermine market access for U.S.
suppliers. For example, for the United States to meet the
exports using trademarks and generic terms through any
full commitment of an additional $32 billion in agricultural
geographical indications measures taken in connection
exports to China over two years would likely require both
with an international agreement. This limits China’s
diverting U.S. exports to China from other markets and
ability to prevent imports of U.S. products that may
China substituting some imports from its current sources to
have a geographical indications trademark in another
products from the United States. If the principal result of
country with which China has a trade agreement.
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.
agricultural products will occur at market prices and
Market Implications of China’s Import
conditions, which may dictate the timing of purchases
Commitments
within any given year (Chapter 6, Article 6.2.1).
U.S. exports to China of agricultural products that China
Additionally, the coronavirus outbreak in China is likely to
has committed to purchase under the Phase I agreement
lower import demand for agricultural products. Therefore,
declined 46% in value from 2017 to 2018 even as U.S.
additional U.S. agricultural exports to China may fall short
exports to other countries increased. In 2019, China’s
of the target of $32 billion over two years.
Figure 2. U.S. Agricultural Exports Since 2017
In Bil ions of U.S. Dollars

Source: CRS using FAS, based on U.S. Census Bureau Trade Statistics, Product Group BICO-HS-10, January 13, 2020, 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). Data also includes
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

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