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February 22, 2019

U.S. stock futures may have been sensing some optimism on February 20, 2019, pointing higher ahead of more trade talks between the United States and China, according to CNN Business.

 

Steve Censky, the U.S. Department of Agriculture’s (USDA) deputy secretary affirmed that sentiment, saying “the pace of negotiations is picking up as we approach March 1.”

 

That’s the date by which President Trump has indicated that he will increase tariffs on $250 billion worth of Chinese goods from 10 to 25 per cent, if he doesn’t feel the two leaders are close to reaching a deal.

 

In terms of discussions over agriculture trade, last week “we were able to make some progress, close some gaps, but we still have ways to go,” Censky was quoted by Bloomberg.

 

“Our goal in these negotiations when it comes to agriculture is not only to get some very robust purchase commitments, but to really get the fundamental structural reforms that are necessary over the long term,” he added.

 

The U.S. is seeking commitments from China that they are going to fill their tariff-rate quotas they’ve pledged to uphold under World Trade Organization agreements. The quotas pertain to shipments of wheat, corn and rice.

 

They also want to see that China is “going to have a functioning biotech approval process -- that they are going to abide by international standards when it comes to animal drugs, veterinary drugs and hormones,” Censky said.

 

News outlet Channel NewsAsia reported significant progress in the talks on February 21.

 

Sources reported that negotiators were now working to draw up memorandums of understanding (MOUs) covering the most complex challenges affecting the trading relationship, including the structural issues to which Censky referred: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

 

One source cautioned that despite these steps being taken, the talks could still end in failure. But the work on the MOUs was a significant step in getting China to sign up both to broad principles and to specific commitments on key issues, he said.

 

However, in another report on Feb. 21, the Financial Timess aid that a potential ‘snag’ had arisen with one of the structural issues in the trading relationship, specifically concerning Chinese currency. The U.S. had asked China to agree to keep its currency ‘stable’ and to agree not to allow it to weaken below a specified rate of exchange against the U.S. dollar. This would deter China from resuming its beggar-thy-neighbour tactics, by which it might secure an unfair competitive advantage in world markets. 

 

According to financial experts quoted in the Financial Times, there would be pros and cons in the short term and longer term for China’s currency, should they agree to this latest request, or not.  

 

And so the talks continue.

 

With tremendous implications for agriculture currently hanging in the balance, the last word goes to USDA deputy secretary Steve Censky. “I don’t think we will solve everything this week [either], but if we can narrow the difference and make progress and we can report to the president and the trade ambassador can report to the president that we are making progress and that we are close, I think that will be positive,” he said.

 

Sources:

Channel NewsAsia: bit.ly/2SPFruq

Financial Times Alphaville: on.ft.com/2SOM2oZ

Bloomberg:  bloom.bg/2tyNJYF

CNN Business: cnn.it/2U7iDTL

Successful Farming: bit.ly/2Gzqar2

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Submitted by Robyn Meerveld on 22 February 2019