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Food & Ag Policy Briefing: US-China 'phase one' deal, WTO body paused, 'Green Deal' controversy

Also, Brexit now on course for end of January, 2020

The United States and China have reached a ‘Phase One’ trade agreement, it was revealed late on Friday (December 13), including some unspecified agricultural commodity purchases by the Asian country.

More importantly overall, it means there will not be a further escalation of the trade war between the two countries in the near term as the Trump administration will not proceed with the planned additional tariffs on $156 billion in Chinese goods that was scheduled to come into place yesterday (December 15).

For now, the US will be maintaining 25% tariffs on approximately $250 billion of Chinese imports, along with 7.5% tariffs on approximately $120 billion of Chinese imports, according to the Office of US Trade Representative (USTR) Robert Lighthizer.

From the Chinese side, they agreed not to put higher tariffs in place on December 15 of 10% and 5% on more than 3,300 types of US goods, including auto parts and chemicals.

Further, USTR noted the “Phase One agreement also includes a commitment by China that it will make substantial additional purchases of US goods and services in the coming years.”

Lighthizer later told reporters at the White House that China committed to purchase an additional $16 billion in US ag goods in the first year, up from a 2017 baseline of $24 billion, and that the purchases would be $32 billion of additional products over two years. However, he also commented that China said they would make efforts to get to $50 billion in ag purchases.

Lighthizer also said that the list of commodities would not be publicly disclosed but it is expected it will include soybeans, wheat, corn and pork.

US agricultural groups have reacted with positivity towards the developments but will remain cautious until the broader terms of the deal are revealed.

In more good news for US trade (December 10), an agreement was also reached on altering provisions in the US-Mexico-Canada Agreement (USMCA).

US House Democrats claimed victory in negotiating changes to the agreement to ensure better protection for workers, the environment and remove key provisions that they said would have benefited big pharmaceutical companies. But the year-long negotiations between a Democratic working group and USTR Lighthizer really produced an agreement all parties could accept.

The changes make the deal “infinitely better" than the originally negotiated pact, House Speaker Nancy Pelosi said, labeling it a “victory for American workers."

WTO shutdown

As one trade dispute seemingly took a first step towards resolution via a bilateral approach, the multilateral World Trade Organization’s (WTO) function for dealing with such issues came grinding to a halt last week (December 11).

The expiration of the terms for two judges on the Appellate Body was on December 10, meaning only one now remains. The Body will therefore lack a quorum to work on existing dispute settlement appeals or accept new ones.

The US is unilaterally blocking new appointments to the body, insisting on changes that address its concerns it sometimes operates outside WTO rules. Some of these gripes include its approach to deciding cases, judges working on cases after their terms have expired, and the body relying on legal principles not set out in WTO’s Dispute Settlement Understanding (DSU) that governs WTO dispute settlement cases.

WTO members generally agree that change is needed but Ambassador David Walker of New Zealand, who has been charged with trying to find a way through the deadlock, has admitted that ultimately the members themselves must decide what action they need to take to move things forward.

“I can only hope that the discussions we have been having since the start of the year, and in recent weeks in particular, will have generated the trust and confidence needed to take such action,” Walker concluded.

Saying they "are concerned about the challenges that the WTO is facing," a group of 54 WTO members, including China, Canada, South Korea, and Mexico issued a statement reiterating their support for the global trade body.

Citing "a strong resolve to finding concrete solutions" to the current impasse on Appellate Body appointments, the members stressed the urgency of filling current vacancies as soon as possible so that the body can resume its work.

Separately, EU Commissioner for Trade Phil Hogan also voiced disappointment with the development. "This is a regrettable and very serious blow to the international rules-based trade system," he tweeted, adding "the EU firmly believes that a WTO with an effective dispute settlement system is indispensable for ensuring open and fair trade."

‘Green Deal’ launch

The new European Commission has published details of its ‘growth strategy’ built around the plan to make the EU the first climate-neutral continent on Earth as of 2050.

Controversially, the Deal will leave reforms to the Common Agricultural Policy (CAP) untouched and will place the emphasis on individual member states to boost the environmental performance of the bloc’s farming policy.

The Commission said it will rely on member states’ CAP Strategic Plans as a key way for agriculture to “fully reflect the ambitions” of the new policy.

Strategic Plans are part of the proposed CAP reform and will require member states to detail how they will meet different sustainable farming standards set at an EU-level. But these proposals have been criticised by researchers and the European Court of Auditors for setting the bar too low to effectively address the environmental and climate challenges the EU faces.

National governments are also trying to water down the thresholds of these standards, such as Good Agricultural and Environmental Conditions (GAEC).

That, in theory, sets the bar lower for what must be included in member states’ Strategic Plans and would see the Commission pass on the next CAP’s climate and environmental ambition to those who are currently trying to weaken it.

“The Commission's refusal to strengthen its CAP reform proposal is a missed opportunity to align the CAP with the EU Green Deal,” said Celia Nyssens, agricultural policy officer at the European Environmental Bureau, an NGO.

Earlier in the week, new EU Agriculture Commissioner Janusz Wojciechowski said the Commission is focusing on member states’ Strategic Plans for greater environmental ambition because of the slow progress in the negotiations on the next CAP.

The EU executive already foresees that the next EU farming policy will only enter into force in January 2022, instead of in January 2021, with the think tank Farm Europe predicting it could be delayed until 2023 or 2024.

Wojciechowski said he wants to avoid changing the CAP reform proposals because this would risk further delays.

Brexit in January

Finally, the UK is on course to finally leave the EU at the end of next month after the Conservative Party won a large majority in the country’s general election last week (December 12).

The party achieved an overall majority of almost 80 seats in the new House of Commons, giving prime minister Boris Johnson a clear mandate for the next five years, and finally bringing the first part of the UK’s long-running Brexit saga to a conclusion.

After two-and-a half years of minority government, during which dramatic knife-edge votes on key issues in Parliament had become commonplace, Johnson will now have much more freedom to push his Brexit agenda through with minimal risk of disruption.

Opposition parties, which had favoured a renegotiation of the UK’s Withdrawal Agreement with the EU and a second referendum on UK membership of the EU, suffered serious losses in the election, notably Labour, the main opposition party, which lost around 60 seats.

The centrist and pro-European Liberal Democrat party failed to make any impression, with its party leader, Jo Swinson, losing her own seat in parliament.

The result means that the UK will now definitely leave the EU at the end of January, with no further delays.

UK food and agriculture groups largely welcomed the result as it offers an “end to uncertainty” but some expressed anxiety about the nature of future trade agreements with countries around the world, as well as casting doubt on whether the UK can reach a trade deal with the EU before the end of 2020.

The Country Land and Business Association (CLA) said the election result was welcomed for bringing “a degree of political certainty”.

But CLA president Mark Bridgeman said that for all the claims of “getting Brexit done” the idea that Brexit ends on 31 January “is wrong”.

“Assuming we leave the EU [in January], we will have less than a year to negotiate a Free Trade Agreement with Europe or else once again No Deal is back on the table.  This timeframe is hugely optimistic,” Bridgeman said.

In case you missed it…

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