Assessing the “First-stage Trade Deal” between the US and China: Implications on World Agrifood Trade Patterns and China’s Agricultural and Rural Policy Adjustment

Organized Session at the XVI Congress of the EAAE (European Association of Agricultural Economists).

Details about participation: http://www.eaae2021.org/en/detailed-programme

The US-China trade war has had fundamental impacts on the bilateral trade patterns between the world’s largest economies and its ripple effects can also be felt elsewhere in the world. In the areas of agricultural and food trade, it significantly altered existing trade patterns bilaterally and beyond. During the trade war, China has had several rounds of retaliatory tariff escalations targeting US agrifood exports, including a drastic reduction on US soybean exports that handicapped soybean farmers in the Midwest US but benefitted Brazilian farmers. Another notable example is that the reductions of US pork exports–together with China’s increased import demand arising from its internal supply side shocks – has boosted pork exports from several European Union member states such as Denmark.

With the two sides finally settled on the so-called “First-stage Trade Deal” in January 2020, China reportedly agreed to ambitious purchases of agricultural and food products from the US for both 2020 and 2021,with the 2021 purchase targets essentially doubling China’s pre-trade war imports from the US.

This organized session first aims at understanding the agricultural trade policy adjustments that are expected from China in order for it to implement the purchase commitments, including but not limited to repealing part or all parts of the retaliatory tariffs imposed on US exports during the trade war(see contribution 1). More broadly speaking, this session also strives to analyze how and to what extent recent and ongoing domestic agricultural and rural development policy adjustments in Chinamay rationalize its agricultural and food trade patterns, and possibly make it easier for China to accommodate increased agrifood imports(see contribution 2). In the third contribution, a quantitative analysis is offered to investigate the trade-creation effects of China’s possible trade policy adjustments with respect to bilateral imports from the US, as well as the likely trade-diversion effects regarding imports from other countries including the EU, particularly if China is forced to offer the US preferential treatment that goes beyond China’s WTO MFN commitments. In the last contribution of the session, China’s long-term trade strategy in soybean and meats (particularly pork) –two of the more prominent products highlighted in the trade war –is analyzed in connection with the need for China to implement the First-stage Trade Deal. In this respect, both the substitution between the imports of the two products and the likely reconfiguration of sourcing patterns across major exporting countries are evaluated.

As the US and China are dominant players on the world agrifood markets (as one of the main exporters and the largest importer, respectively), this session strives to make a meaningful contribution to an important and timely policy debate. The session is also very much relevant to a European audience, as the third-country impacts of the trade deal includes changes in the EU’s agrifood trade pattern with China.

The session contains four interconnected contributions. Among the four main presenters, Jing Zhu is the Dean and Distinguished Professor at Nanjing Agricultural Economics (NAU) and also a Delegate to China's National People's Congress; Funing Zhong is a Distinguished Professor at NAU; Shingo Kimura is currently a Senior Natural Resources and Agriculture Specialist in the ADB with a focus on China and East Asia (he was previously an agricultural economist at the OECD); Wusheng Yu is Professor of Food Economics at the University of Copenhagen. All four presenters have significant experience working on agricultural trade and policy issues in China. Professor Luca Salvatici agrees to open up the discussion, to be followed up an interactive question and answer session with the audience.

Below is the presentation program.

Chair(s): Yu, Wusheng (University of Copenhagen, Denmark), Zhu, Jing (Nanjing Agricultural University)

Discussant(s): Salvatici, Luca (Università degli studi Roma Tre)

Presentations of the Symposium

  • The US-China Trade War and the First-stage Trade Deal: Implications for China’s Agricultural Trade Policy Adjustment
    Zhu, Jing, Li, Tianxiang
    Nanjing Agricultural University
  • The First-stage Trade Deal and the Ongoing Agricultural and Rural Policy Adjustments in China
    Kimura, Shingo1, Yu, Wusheng2, Han, Mingxi3
    1Asian Development Bank, 2University of Copenhagen, 3Renmin University China
  • Evaluating the Impacts of the First-stage Trade Deal on the Global Agrifood Markets: Trade Creation and Trade Diversion
    Zhong, Funing, Cao, Lijun, Wang, Rongbo
    Nanjing Agricultural University
  • China’s Long-term Strategy in Pork and Soybean: Does the Bilateral First-stage Trade Deal with the US Matter?
    Yu, Wusheng, Clora, Francesco,
    University of Copenhagen.