Strategies have changed on international trade, NDSU's Olson says
GRAND FORKS, N.D. -- Frayne Olson understands that agriculturalists often have trouble keeping track of trade issues and new developments involving them. Olson, North Dakota State University Extension farm management specialist/marketing speciali...
GRAND FORKS, N.D. - Frayne Olson understands that agriculturalists often have trouble keeping track of trade issues and new developments involving them. Olson, North Dakota State University Extension farm management specialist/marketing specialist, says he has the same problem.
Olson spoke Oct. 28 in Grand Forks at the annual Outlook Conference for Agricultural Lenders. About 90 ag bankers from northeast North Dakota and northwest Minnesota attended the event, at which Olson and other NDSU Extension specialists gave their insights on a number of issues.
Under the Trump administration, U.S. trade policy strategy has shifted from multilateral agreements (ones between many countries) to bilateral agreements (ones between the United States and a single country, most notably China), Olson said.
"We can debate the effectiveness of this, but the Trump administration firmly believes philosophically that a bilateral agreement can negotiate better terms than a multilateral agreement," Olson said. "The idea is, we can hopefully get better terms for the U.S. doing it that way. Whether that's true or not, we'll find out."
The Trump administration also is using tariffs to increase negotiating pressure, he said.
Verbal agreement has been reached for the basic components of a "Phase One" trade deal between China and the U.S., though details need to be worked out, Olson said.
U.S. officials have said that China made a "serious commitment" to increase its purchases of U.S. ag products to $40 to $50 billion annually. That would be roughly double the $25.8 billion of U.S. ag products that China bought in 2014, the year in which China imports of U.S. ag products peaked.
But the commitment is for dollar amounts, not physical quantities, and Chinese officials have said that purchases will depend on market conditions and needs of private companies.
"The translation for that is, we (China) will buy what we want when we want to," Olson.
So at least for now, it's unclear what U.S. ag products China will buy, and when they'll be purchased. Consequently, it's also unclear whether exports of ag products such as soybeans would increase substantially under the tentative Phase One agreement, Olson said.
In the past, China has purchased a wide range of U.S. ag products, including pork, beef, chicken, animal hides, soybeans, ethanol, corn, spring wheat, rice, hay and various fruits and vegetables.
Future Chinese imports of U.S. fruits and vegetables could be especially important, Olson said.
"If you're going to go from $20 billion in purchases to $40 billion in purchases, how do you do that? How do you do that in 12 months?" he asked.
"You start buying some really high-value products, right?," a category that includes fruits and vegetables," he said.
The so-called "Phase Two" trade agreement between China and the U.S. is expected to address more difficult issues such as forced technology transfer and non-financial services, Olson said.
He said other trade agreements that bear watching include:
• The United States Mexico Canada Agreement, or USMCA, and the successor to the North American Free Trade Agreement, has been approved by the Mexican Congress. The U.S. Congress and Canadian Parliament have yet to do so, however. The agreement allows more access of U.S. dairy products into Canada, and also requires Canada to grade U.S. wheat the same as Canadian wheat and not require country-of-origin statements.
• The U.S.-Japan Trade Agreement has been signed, but few details have been released. It will eliminate tariffs on many U.S. ag exports.
• The Comprehensive Economic and Trade Agreement, or CETA, between Canada and the European Union has been ratified by the Canadian Parliament. Canada and the United States export some of the ag products to European countries.
• The United States and the European Union have just begun trade negotiations.
• Britain has agreed to come up with an exit plan, known as Brexit, for its withdrawal from the European Union.