Economic Tidbits

Trade Truce, Twice…

Two developments on the trade front can be celebrated by Nebraska agriculture. First, Democrats in Congress, the Trump Administration, and Mexico have agreed on provisions to include in the United States-Mexico-Canada Agreement (USMCA) which should pave the way for passage.

Mexico and Canada are two of Nebraska’s largest customers for agricultural goods. The new agreement will offer increased market access for the poultry and dairy sectors, certainty for trade with these nations in other agricultural goods, as well as updated phytosanitary and biotechnology provisions. Passage of USMCA will also protect access to markets Nebraskans have worked hard to secure over the past two decades.

Last week it was also announced the U.S. and China have confirmed Phase One of a trade agreement. As part of the deal, China has reportedly agreed to purchase $40-$50 billion of additional U.S. agricultural goods over two years, although there’s some uncertainty to the exact amount. While promising, some skepticism has arisen whether China can indeed purchase that amount of goods. U.S. agricultural exports to China equaled almost $22 billion in fiscal year 2017 (October 2016-September 2017), the last full trade year prior to the dispute. Thus, Chinese purchases would need to exceed those made prior to the disruptions to fulfill the promises. Reduced Chinese soybean demand due to African Swine Fever (ASF) and inroads made by competitors may make that difficult to do. On the other hand, China’s growing demand for protein due to ASF will create opportunities for U.S. meat exports. The thought that U.S. agricultural goods may again flow to China somewhat unimpeded is encouraging for Nebraska producers.

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