ASA advocates for trade expansion and market access for soybeans, including removal of the China 301 tariffs and progress on new free trade agreements (FTAs).
ASA continues to engage with and monitor the progress the Administration is making in its negotiations with China and implementation of the 2020 U.S.-China Phase 1 Agreement. ASA is working with the Administration and Congress to resolve outstanding tariff issues between the U.S. and China; the countries have been engaged in tit-for-tat tariff retaliation since 2018, which led to retaliatory tariffs on U.S. soybeans in July that year. We are hopeful the Phase 1 Agreement is a positive sign toward tariff relief for soybean farmers and a return soon to market-driven exports.
With the U.S.-Mexico-Canada Agreement (USMCA) ratified, ASA looks to the United States Trade Representative (USTR) to negotiate new FTAs with countries that have potential to increase soy and livestock products. These include continuing work on a comprehensive U.S.- Japan agreement, as well as agreements with the EU, UK, India and other significant soy and livestock-importing countries.
ASA supports a doubling of funding for the Foreign Market Development (FMD) program and the Market Access Program (MAP). U.S. farm groups pushed hard to double funding for the MAP and FMD in the 2018 Farm Bill. While these programs received a marginal increase, doubling funding continues to be a priority.
On September 25, 2019, the U.S. and Japan completed a limited FTA that reduced tariff levels on agriculture products to the Trans-Pacific Partnership (TPP) levels effective January 1, 2020. This was welcome news, as ASA has been encouraging the Administration to engage with Japan since the pullout of TPP. This became more vital in November 2018, as Vietnam became the seventh country to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which allowed the CPTPP to go into effect at the end of 2018. Reducing tariffs and increasing market access are key objectives for ASA, as Japan is the 5th-largest market for U.S. soybean exports, with shipments valued at $976 million in 2017. USTR has indicated that this initial U.S.-Japan Agreement would lead to negotiating a more comprehensive U.S.-Japan FTA.
The Administration formally notified Congress in October 2018 of its intent to negotiate FTAs with the EU and the UK, respectively. In January 2019, USTR released its negotiation objectives for the EU-U.S. FTA, which included agriculture. However, the EU has been resistant to including agriculture chapters in an FTA. This led FTA talks to stall in mid-2019. However, a visit from Phil Hogan, the EU Commissioner for Trade, in early 2020 may allow talks to resume. ASA has shared its priorities for an EU FTA with USTR that includes addressing trade barriers around EU biotechnology approval, resolution to the EU pesticide Law (Maximum Residue Levels) and addressing long-term Renewable Energy Directive (RED) acceptance.
Initially the U.S. and UK had postponed negotiations until after a decision on Brexit was reached. However, on January 31, 2020, the UK officially left the EU. They have now entered an 11-month transition period. During this period, the UK effectively remains in the EU's customs union and single market and continues to obey EU rules. However, it is no longer part of the political institutions. A new deal between the EU and UK will need to be reached by January 2021.
In early March, the UK released its negotiating objectives for a U.S. FTA, which include agriculture. However, the largest determinant of how a U.S.-UK deal will unfold will depend on whether the UK continues to follow EU rules.
USTR announced in early 2020 that the Administration would be looking to negotiate an FTA with Kenya, which would be the United States’ first free trade agreement in sub-Saharan Africa. There have also been indications of a desire by President Trump to reach an agreement with India. However, the scope and nature of such an agreement remains undefined.
ASA supports the doubling of funding for the Market Access Program and the Foreign Market Development Program to $400 million annually for MAP and $69 million annually for FMD. Annual MAP funding has remained at $200 million since 1990, and FMD funding has been limited to $34.5 million per year even longer. The ten-year, $2.5 billion cost of doubling funding for export promotion activities is justified by the need to enhance long-term competitiveness, now more important than ever.
Section 301 of the Trade Act of 1974 gives the U.S. Trade Representative broad authority to respond to a foreign country’s unfair trade practices. USTR’s affirmative determination of actionable conduct gives it the authority to take all appropriate and feasible action to obtain the elimination of the act, policy or practice, subject to the direction of the President. The statute includes authorization to take any actions that are within the President’s power with respect to trade in goods or services, or any other area of pertinent relations with the foreign country.
On July 6, 2018, President Trump announced the enactment of $50 billion in tariffs on Chinese products under the section 301 investigation. As a result of the U.S. enacting its tariffs, the Chinese Department of Commerce reciprocated with its own list of $50 billion in tariffs against U.S. products. This list included a 25% tariff on imported soybeans from the U.S. Since the enactment of the $50 billion in tariffs, President Trump has added an additional $200 billion in tariffs on Chinese products.
In December 2019, the Administration announced it had reached what it called a Phase 1 Agreement between the U.S. and China that would include reduced barriers to trade across a variety of sectors, as well as commitments by China to purchase a substantial amount of U.S. goods—including agricultural products. However, the content of the agreement was not fully known until January 15, 2020, when President Trump and China officially signed the initial deal.
Soybean growers who have long advocated for a negotiated solution between the U.S. and China were pleased to have reached a Phase 1 Agreement that could de-escalate the tariff war that has been negatively affecting the agriculture economy and soybean growers for the last two years. The Phase 1 agreement offers resolution to non-tariff barriers, including promising language on agriculture biotechnology, sanitary and phytosanitary issues, and intellectual property rights, among other areas. China agreed to implement a transparent, predictable, efficient, science- and risk-based regulatory process for the evaluation and authorization of agricultural biotechnology products. This language has the potential to significantly reduce the time it takes to reach approval of new traits in China, thereby allowing U.S. farmers to utilize traits that help combat a host of challenges.
The agreement also makes broad commitments by China to purchase an additional $200 billion worth of U.S. goods over two years in the areas of agriculture, manufacturing, energy, services and goods. The agricultural purchases component of the agreement committed China to purchases $80 billion worth of U.S. agricultural products over the next two year. Under this agreement, China has committed to purchase an additional $32 billion ($12.5 billion 2020, $19.5 billion 2021) in agriculture products above the 2017 baseline of $24 billion. While it is unknown what portion of that overall number will be soybean purchases, soybean growers are hopeful these commitments will help get them back to pre-2018 export levels.
Despite the advances in the Phase 1 deal, soybean growers remain concerned that it does not include an official commitment by China to remove the harmful retaliatory tariff on U.S. soybeans. While the retaliatory tariffs are still in place, the Chinese government began to allow companies to apply for tariff waivers to exclude companies from the 25% tariff in September 2019. Since the signing of the deal, China has reiterated its intent to provide exceptions. While this may allow additional companies the ability to purchase U.S. soybeans without the retaliatory tariffs, ASA continues to urge the U.S. and China to formalize a full removal of agriculture tariffs.
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