By Josh Zumbrun and Yuka Hayashi
WASHINGTON -- China accelerated purchases of U.S. farm products
last month, new data shows, but overall it remains far behind on a
commitment to buy about $140 billion in U.S. goods this year under
the bilateral trade accord signed Jan. 15.
As of Sep. 30, China had purchased $58.8 billion in goods
covered by the agreement, according to calculations from Chad Bown
of the Peterson Institute for International Economics based on
Commerce Department figures released Monday. Purchases should have
reached $108 billion by that time to be on track toward the
full-year target.
"Certainly, the Chinese are not going to meet the commitments,"
said Scott Kennedy, a senior adviser at the Center for Strategic
and International Studies. "The trend lines don't look good
regardless of which category you are talking about."
Mr. Kennedy and other economists said declines in China's
domestic demand amid the Covid-19 pandemic was in part responsible
for the slow purchases.
Farm products have shown improvement through the year. China has
purchased or committed to purchase about $23 billion in
agricultural goods, U.S. government officials said Friday, or about
71% of its target. The U.S. report said purchased or contracted
sales of corn are at an all-time high of 8.7 million tons, and that
U.S. pork exports to China are at record levels.
The $23 billion figure includes contracts for future purchases
that have not yet been completed. In terms of actual exports
through September, the U.S. had sent $12.7 billion of agricultural
goods to China through September against a target for 2020 of $33.4
billion.
For manufactured goods, the U.S. has exported $40.2 billion
against an annual target of $83.1 billion. Many categories of
manufacturing have been depressed by the pandemic, but one of the
biggest categories -- aircraft exports -- has also suffered from
Boeing Co.'s crisis over its 737 MAX airplane.
For energy, sales to China are especially far behind. As of
September, the U.S. has exported $5.9 billion against a target for
the year of $26.1 billion. The gap is so wide in part because
energy prices collapsed earlier in the year, requiring a far
greater volumes to meet the goal, which is specified in terms of
dollars, not product volume.
The Chinese Embassy in the U.S. didn't respond to questions
about the purchase targets. During a videoconference with U.S.
business representatives on Oct. 19, Chinese officials said China
has done a "huge amount of work" to promote the implementation of
the trade deal and has made "positive progress" in increasing
imports from the U.S., according to a statement posted on the
website of the National Development and Reform Commission, China's
top economic planning agency.
The U.S. Trade Representative, which negotiated the so-called
phase-one trade deal between Washington and Beijing, published a
report Friday detailing progress toward the agricultural
targets.
The report, which the USTR published along with the U.S.
Department of Agriculture, said the phase-one deal was already
getting strong results in the area of farm purchases.
"Since the Agreement entered into force, the United States and
China have addressed a multitude of structural barriers in China
that had been impeding exports of U.S. food and agricultural
products," the report said. "To date, China has implemented at
least 50 of the 57 technical commitments under the Phase One
Agreement.
The report said that combining information on purchases and
contracts for future purchases suggested the Chinese were closer to
targets than indicated by Mr. Bown's methodology, which tallies
only actual exports.
"It is still to be seen whether they meet their target but
particularly given the COVID-19 effects on the global economy they
are making substantial progress," the report said.
Some U.S. officials view the improvement in agricultural
purchases as a sign that China is making a sincere push to catch up
on purchases after the pandemic knocked the timeline off course,
and that the shortfall is not a case of China breaking a
commitment.
The accord's targets, however, are about to get harder to meet.
The deal signed in January called for a significant increase in the
pace of purchases in 2021 in order to reach the big headline
promise of an additional $200 billion in sales over two years.
To meet that goal, the purchases would not only need to make up
for lost ground in 2020. The targets next year are about 21% higher
for agricultural goods, about 59% higher for energy goods and 14%
higher for manufactured goods.
Next year could present an opportunity to get on track,
especially as many economic forecasters believe China and U.S.
could see strong growth as they bounce back from the downturn
caused by the coronavirus pandemic and associated lockdowns.
"It's a two-year agreement, and we need to see what happens in
the first half of 2021," said Craig Allen, president of the U.S.
China Business Council. "If the Chinese are going to meet their
agreement, it would be a huge surge in 2021, in the second half of
2021."
Mr. Allen said that while China has so far fallen behind on the
purchase agreement, structural market-opening measures included in
the phase-one agreement have worked well, bringing progress in
longstanding issues faced by American companies in areas such as
banking and intellectual property rights.
In the financial-services industry, for example, Beijing has
allowed JPMorgan Chase & Co. and Citigroup Inc. to set up
wholly owned securities businesses and approved American Express
Co. to process domestic transactions.
In a landmark intellectual-property case, New Balance Inc., the
athletic footwear maker, was awarded damages in a local court over
the use of its logo by Chinese companies.
"The purchase agreements are important but they are short term
and transactional," Mr. Allen said. "These other things are
longer-term and structural. It's important to keep that contrast in
mind."
The U.S. and China formally discussed the purchases in August.
In a joint statement, U.S. Trade Representative Robert Lighthizer
and Treasury Secretary Steven Mnuchin, who led the negotiations
with China, said that "both sides see progress and are committed to
taking the steps necessary to ensure the success of the
agreement."
The future of the trade agreement could change depending on the
result of the Nov. 3 presidential election. If former Vice
President Joe Biden wins, the significance of the purchase
agreement could wane as Democrats see it as an overly aggressive
target set based on Mr. Trump's political agenda.
Mr. Biden has said he will work with allies to push China to
follow international trade rules but hasn't discussed details of
his policy, including what to do with the latest trade deal.
--Liyan Qi contributed to this article.
(END) Dow Jones Newswires
October 26, 2020 18:04 ET (22:04 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.