While the political media focuses on the impeachment saga in Congress, the Trump Administration has been making progress on two major trade negotiations. Tensions with China appear to have eased substantially with the announcement of a “Phase One” trade deal. This initial deal will cover some of the largest disagreements between the world’s top two economic powerhouses. The U.S., Mexico and Canada also appear close to finalizing the modernization of the North American Free Trade Agreement (NAFTA).
In both deals, agriculture stands to gain more than any other sector of the U.S. economy. Preliminary reports say Chinese negotiators agreed to increase U.S. ag purchases to at least $40 billion annually over the next two years.
If the deal comes to fruition, it would represent at least a 500 percent increase from current annual sales of about $8 billion. It would even almost double pre-trade-war sales. In 2017, the year before the tariff battles began, U.S. farmers exported about $24 billion worth of agricultural goods to China.
Many farmers are hesitant to get too excited, though, until pen goes to paper and goods are actually delivered. Several times in the past, Chinese buyers have reneged on their promises and purchases at the last minute. The Trump Administration says it expects to sign the China agreement in Washington the first week of January. It would go into effect 30 days after signing.
The U.S.-Mexico-Canada Agreement (USMCA) will modernize the quarter-century-old NAFTA agreement. American businesses have long sought to update the agreement for the modern economy. The original deal did not even address online sales or data, as the digital economy was still in its infancy.
The deal will increase access to Mexican and Canadian markets for American farmers exporting dairy, eggs and poultry. Trade with these two countries supports nearly 240,000 jobs in Missouri. In 2017, it generated $7.8 billion in exports of total goods from Missouri.
The International Trade Commission stated that USMCA would have “a positive impact on the U.S. economy,” raising U.S. GDP by $68.2 billion. The agreement is particularly important for farm families. According to the U.S. Trade Representative, 20 percent of farm income is directly related to international trade.
U.S. farmers and ranchers still have much more ability to supply goods to the world. Hopefully these deals are only the first of many that can expand our markets and improve the bottom line of Missouri farm families.