If China sticks to the terms it’s laying out in its new agreement with the U.S., it could automatically become the third largest import market for wheat farmers worldwide, says a U.S. Wheat spokesman.
The deal includes new, more specific rules for China to import wheat under its tariff rate quota (TRQ) of 9.64 million tons, said Dalton Henry, vice president of policy for U.S. Wheat, the overseas marketing arm for the industry.
“It’s not every day you can find that size of a market,” Henry told the Capital Press.
Even if U.S. wheat producers only do a third of that business, which Henry considers a “pretty conservative” estimate, it means a brand-new No. 1 export market for U.S. wheat producers, he said.
“It would be like adding a brand-new Japan to U.S. wheat exports out of the Pacific Northwest,” Henry said.
Previously, China had never allowed the quota to fill.
“They found ways to frustrate it, the majority of it is held by state trading entities,” Henry said.
U.S. Wheat believes China is more likely to adhere to the agreement because the U.S. won a case against China in the World Trade Organization last spring. China had already issued new rules in September. The rules in the phase one agreement go a step further, Henry said.
“In our minds, this agreement is very significant, but it’s even more significant because it’s not standing by itself on a TRQ front,” he said. “That makes it very likely that it’s put into place in a way beneficial for U.S. wheat.”
“Access to Asian markets is critical for Pacific Northwest wheat growers,” Bill Flory, Idaho Wheat Commission board member and chairman of the Wheat Marketing Center, said in a press release. “This agreement is encouraging from that export standpoint but also for the benefit of millers and consumers in China who will have more high-quality U.S. wheat products available.”
Questions remain about the $40 billion to $50 billion in agricultural purchases under the agreement, Henry said, but U.S. Wheat is excited about the structural pieces of the agreement, including requirements for additional transparency regarding domestic support.
The U.S. won a second case against China in the WTO on this matter last winter, with a ruling that China had exceeded allowable levels of support.
”It is so hard to collect data on exactly what China is doing with their government policies; it’s good to see those included as well,” Henry said.
In a phase two agreement, the agricultural industry would like long-term certainty that China is stepping away from retaliatory tariffs on U.S. products, providing confidence in consistent buying each year, and cooperation on sanitary and phytosanitary animal and plant health measures.
“The Trump administration deserves a lot of credit,” Henry said. “The WTO wins took a big step forward; this builds on those. The hope would be that Phase Two continues to build on any successes we see out of this one.”
Henry said with uncertainty taken out of Japan, this first phase with China and movement on the USMCA trade deal with Canada and Mexico, the wheat industry hopes the country can return to “proactive” negotiations with countries like Vietnam and the United Kingdom, all ripe for U.S. wheat exports.