In the US-China ‘phase-one’ trade and investment agreement, China has agreed to purchase an extra $32 billion of US agricultural products over a two-year period. But as G&O imports are only expected to reach 50% to 60% of the purchase targets in 2020 and 2021, China will have to buy large quantities of non-G&O agricultural products, according to Rabobank’s latest cross-sectoral F&A report.
The US and China signed the ‘phase-one’ trade and investment agreement on January 15. The agreement includes a sharp increase in sales of US goods and services to China, stricter intellectual property right protections, wider market access to China’s financial market, etc. With regard to agricultural products, the agreement calls for agricultural imports to reach $36.5 billion and $43.5 billion in 2020 and 2021, respectively.
Read the report here: Rabobank Us China Phase One Agreement
“According to Rabobank’s projections, G&O imports on their own will only reach 50% to 60% of the purchase targets for US agricultural products in 2020 and 2021,” says Rabobank G&O Analyst Lief Chiang. “This means China will have to buy large quantities of non-G&O agricultural products, such as meat, seafood, dairy, and cotton to make up the difference. To facilitate the high procurement, most of the existing retaliatory tariffs are expected to be removed soon.”
It is worth mentioning that although the purchase targets in terms of trade value are listed in the main body of the agreement, there may also be minimum trade volume requirements for each agri commodity in the side annex – this has not been released to the public. As commodity prices are volatile, it is challenging to project the FOB prices of US agricultural products. Rabobank has taken the 2017 FOB prices as a reference. China’s import value of US G&O will reach $19 billion in 2020, achieving 52% of the trade target, and $26 billion in 2021, achieving roughly 60% of the target.