China Official: Trade Talks with U.S. 'Very Difficult' and 'Very Exhausting'

Posted on 03/06/2019 6:24 AM

U.S. ag negotiator Doud comments on talks with China | U.S./EU meet today on trade pact


Chinese media suggest their negotiators believe they can leverage President Donald Trump on remaining issues for a U.S./China trade accord once Trump and Chinese leader Xi Jinping meet later this month. Until then, officials from both countries have offered some insight to the ongoing talks.
     U.S. and EU officials meet today in Washington on what continues to be thorny talks aimed at reaching an agreement by the end of the year. Agriculture is one of the major issues, with the U.S. insisting it be included in the talks and EU balking, saying if ag is included, the process will “take ages” to conclude.
     President Trump will not like today's update on U.S. trade deficit gaps with China and the world when updated information is released.
     The global economy will continue to weaken this year, according to the OECD, weighed down by trade disputes and uncertainty over Brexit. The interim outlook report showed GDP growth averaging around 3.3% in 2019, down from the 3.5% seen in the OECD's last forecast in November (which was already cut from 3.7%). "A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets," said Laurence Boone, the OECD's chief economist.
     Satellite images suggested that North Korea has rebuilt part of its Sohae rocket launch site. The renewed activity could indicate that Pyongyang is preparing to end its moratorium on missile tests. But South Korean intelligence officials reportedly told lawmakers that North Korea had been rebuilding the facilities even earlier, possibly to make their dismantling more dramatic if a deal was reached with the U.S. Meanwhile, North Korea had its worst food harvest in more than a decade. Natural disasters, the lack of arable land, and inefficient agriculture hit food production levels, according to the United Nations.
     More than 76,000 migrants crossed the U.S./Mexico border without authorization in February, an 11-year high. “The system is well beyond capacity, and remains at the breaking point,” Kevin McAleenan, commissioner of Customs and Border Protection, said on Tuesday.
     Aging Swedes are being treated to 3D-printed food. Two care homes are creating foods like broccoli and chicken legs from purée to try make meals more palatable. Link for details.

 

U.S./China trade policy update:

  • President Donald Trump is pressuring U.S. negotiators to reach a trade agreement with China soon because he’s growing increasingly concerned the lack of a deal will drag down stocks, Bloomberg reported, citing people familiar with the matter.
  • Former Chinese finance minister Lou Jiwei said that China won’t make big concessions to reach an accord and described some U.S. demands as “just nitpicking.”
  • China official comments on trade talks with United States. China’s trade talks with the U.S. the last few weeks have been “very difficult” and “very exhausting,” said Commerce Minister Zhong Shan. “I’d say it’s hard and difficult because the two countries have huge differences in their institutions, cultures and stages of development. The two sides had to make extra efforts [to reach consensus], so it was very difficult, it is very hard,” Zhong said on the sidelines of the National People’s Congress on Tuesday. “[The negotiation] was also exhausting because the time available for negotiation was very limited — we were originally scheduled for two days and then the talks were extended for another two days, but the time was still very limited. Our team worked overtime and overnight.” Zhong accompanied Vice-Premier and chief trade negotiator Liu He to Washington for the last round of talks in February. He said the negotiation, although tough, proved “fruitful” and achieved substantial progress.
  • Doud comments on ongoing U.S./China trade negotiations. Gregg Doud, chief U.S. agricultural negotiator at the U.S. Trade Representative's office, said Tuesday it was unclear whether the U.S. and China would be able to reach an agreement to end the trade war, despite recent reports a deal was close. “I don’t know whether we’ll get a deal or not,” said Doud in response to a question at the Virginia Governor’s Conference on Agricultural Trade. Doud said he was unable to get into specific details. Doud noted that Beijing had responded to President Donald Trump’s tariffs on $250 billion worth of Chinese goods — covering roughly half of all Chinese exports to the U.S. — by retaliating “against 100% of our ag exports to China.” Asked whether he expects that a deal, if there is one, would return U.S. agricultural exports to China to pre-trade war levels, Doud said, “I don’t know what to expect,” but he added there was “ample room” for the U.S. to increase its agricultural exports to China, because the country imported about $125 billion of farm goods from all sources in 2018 and also imposes a number of barriers to U.S. farm exports. He said his orders from Trump were to raise agricultural exports to China above $20 billion by as much as possible.
  • Doud focused on China’s huge stocks of corn, wheat and other commodities. “In China today is 67% of the world’s residual supply of corn; 67% of the ending stocks of corn are in one country. In wheat, 52%; in rice, it’s 69%; in soybeans, it’s 20% and 43% of the world’s cotton is one country,” Doud detailed, revealing he got push back when he tried to persuade his Chinese counterpart there was no need to hold such large stocks when there are ample world supplies. “He bristled,” Doud said. “He said, ‘Oh Gregg, I don’t know if we can depend on world supplies if 5 million tons of corn are needed.”
  • Enforcement of any U.S./China trade accord is key. Senate Finance Chairman Chuck Grassley (R-Iowa) is pressing the Trump administration to make sure enforcement is a key part of any trade deal with China. “Whatever we agree to as a matter of substance, enforcement is very important because we have been snookered by the Chinese in past agreements,” Grassley told reporters Tuesday.
  • Growing U.S. trade gaps. Trade data from the U.S. Commerce Department this morning is expected to show a new record-high trade deficit between the U.S. and China, as well as an overall U.S. trade deficit that’s larger than last year’s.
  • Canadian canola industry 'dealt a serious blow' by China. “The Canadian canola industry was dealt a serious blow this week, and as the dust settles, farmers and industry are wondering if this is could be the first volley in a impending trade war.” Link to article on realagriculture.com.

Doud: USMCA could be toughest congressional trade vote since 2005. The coming congressional debate over approval of the U.S.-Mexico-Canada Agreement (USMCA) could be the toughest trade deal vote since lawmakers signed off on an agreement with Central American countries in 2005, U.S. agricultural negotiator at the USTR said at the Virginia Governor’s Conference on Agricultural Trade. “There is a lot of shoe leather that needs to be expended by U.S. agriculture” to get the deal passed, Doud said. The House passed the U.S.-Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) by a vote of 217-215, with most Democrats voting against the pact because of concern over the potential for job losses. The Senate passed the agreement 55 to 45.

Doud noted the large number of new members of Congress who have never voted on a trade deal. “We have no idea” what their position on trade is, he said.

Doud said failing to pass the USMCA would be a major blow for the U.S. trade agenda, echoing comments from USTR Bob Lighthizer to Congress last week. Doud said the European Union, Canada and Australia all stand to make major inroads in Japan’s agricultural market because of free trade agreements with that country. “If USMCA gets stuck in the chute,” it will be hard to persuade Japan to agree to a trade deal with the U.S., Doud said. “If we can’t get Japan, we’re in real serious trouble in U.S. ag.”

Other items of note:

  • Satellite images suggested that North Korea has rebuilt part of its Sohae rocket launch site. It had promised to dismantle the facility after the first summit meeting between Kim Jong Un and Donald Trump last June. A second summit in February ended without progress. The White House raised the prospect of more sanctions if there is no movement on denuclearization.

  • North Korea had its worst food harvest in more than a decade. Natural disasters, the lack of arable land, and inefficient agriculture hit food production levels, according to the United Nations.

  • FDA Commissioner Scott Gottlieb has resigned (effective in about a month) to spend more time with his family. The popular commissioner's departure could stall his tobacco and e-cigarettes initiatives considering the White House's anti-regulatory stance, although President Trump liked him and did not want to see him leave.

  • Disaster aid package being accelerated. The Senate and House are pushing work on a disaster aid package that could move in both chambers before lawmakers head for a 10-day break March 15. Senate Appropriations Chairman Richard Shelby (R-Ala.) is working with the panel’s top Democrat, Patrick Leahy (D-Vt.), and members of the Georgia delegation on the details of a disaster package that could be inserted into a House-passed measure, passed, and sent back to the House before the next recess, they said. The starting point is the $13.6 billion plan to help Gulf Coast states struck by Hurricane Michael last fall, they said. The measure also includes funds for other areas, including $600 million for Puerto Rico.

  • USDA's Economic Research Service would retain 76 employees in Washington under USDA Secretary Sonny Perdue’s proposal to relocate the agency. The list details who will remain should the plan go forward. Link to list that was first reported by Politico.

  • U.S./EU trade talks today in Washington. U.S. Trade Representative Bob Lighthizer and EU Trade Commissioner Cecilia Malmström will meet today in Washington to discuss future negotiations on a trade agreement. Both have formally laid out their negotiating objectives. Lighthizer last week said the two sides were in a stalemate because of the EU’s refusal to include agriculture in the talks. “We are now discussing with the 28 members of the EU how to address our objectives with the U.S., which probably will hopefully start in a few months,” Jesus Zorrilla, the EU's minister counselor for agriculture, said at the Virginia Governor’s Conference on Agricultural Trade. If agriculture is included in the talks, they “will take ages,” Zorrilla said. President Trump wants the EU to remove its massive industrial and agricultural subsidies and has threatened import tariffs on EU cars if he doesn't get his way. EU automakers are the largest exporters of vehicles to the US. In July of last year, the U.S. and EU agreed to a temporary trade truce while Trump focused on China. Trump must make a final decision on auto tariffs before May 17.

  • Senate Finance Committee has called Lighthizer to testify next week for its first trade-related hearing of the 116th Congress. The focus will be World Trade Organization (WTO) reforms. Panel Chairman Chuck Grassley (R-Iowa) said while the WTO has overall been a force for good, “reform and oversight are critical to the proper functioning of institutions.”

  • KFC and Pizza Hut's owner in China is pushing ahead with expansion plans, opening two stores a day in the world's biggest consumer market. The outlets are banking big on technology, taking payment by facial recognition and having ice cream served by robotic servers, while customers can control background music through their mobile phones like a new-age jukebox. Spun off in 2016 from parent Yum! Brands, Yum China shares have jumped 24% YTD.

Markets. The Dow on Tuesday declined 13.02 points, 0.05%, at 15,806.63. The Nasdaq eased 1.21 points, 0.02%, at 7,576.36. The S&P 500 was down 3.16 points, 0.11%, at 2,789.65.

U.S. budget gap widens in the first four months of the fiscal year. The government ran a $310 billion deficit from October through January, compared with $176 billion during the same period a year earlier, a 77% increase, the Treasury Department said.

The OECD cut its global growth forecast, citing trade tensions. Global economic growth is now seen at 3.3% in 2019 and 3.4% in 2020 by the Organization for Economic Cooperation and Development (OECD), down 0.2 percentage point for 2019 and 0.1 percentage point for 2020 compared to their prior outlook issued in November. "High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown," the OECD said. "Substantial policy uncertainty remains in Europe, including over Brexit. A disorderly exit would raise the costs for European economies substantially." The OECD trimmed U.S. economic growth in 2019 to 2.6%, down from 2.7% previously, and it also put China growth at 6.2% for 2019, down from 6.3% previously. As for a U.S./China trade deal, OECD Chief Economist Laurence Boone told the Wall Street Journal that it would not likely produce a sustained boost to economic growth. “Even if they land an agreement, it’s likely to be limited, and will not bring to the world a lot of certainty,” she noted.


 

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