China trade deal setback for agri-food

A new trade deal with the US that commits China to purchase at least $200bn of extra US goods and services over the next two years is likely to end the recent boom in the EU’s agri-food trade.

Irish exports could suffer, because China became the largest non-EU outlet for Irish beef since import access was granted in 2018.

China has also become one of Ireland’s top five dairy markets, taking €462m of Irish dairy exports in 2019, a year when exceptional demand from China boosted dairy pricing worldwide.

The first year of full trading by Irish beef exporters to China saw volumes reach 12,000 tonnes, worth €31m, in 2019.

But with China last week signing a deal to take $32bn of US agricultural goods over two years, it could be hard for other exporters to get a look-in, never mind increase their trade to China.

Our record-breaking pigmeat exports could also be affected, with US exporters boosted by their new trade deal; by removal of punitive tariffs on US pork; approval of extra US export plants by China; and withdrawal from use of the Ractopamine feed additive by producers for two of America’s largest pig processors.

However, the global shortage of pork due to African swine fever will ensure strong demand for imports in China for a number of years.

The co-called phase-one trade agreement signed between China and the US is an early challenge for EU trade commissioner Phil Hogan, in the job only since the beginning of December.

He said China and the US “have stepped outside the usual framework for doing deals … and they are dealing directly on a bilateral basis”, adding that the EU would have to assess whether the deal is compliant with World Trade Organisation rules. However, it is unlikely that the deal will be set aside, regardless of the threat it poses to EU exports, including €10bn of European agri-food products going to China, which helped the EU to recently record its largest-ever monthly surplus in agri-food trade, of €3.7 billion.

The deal obliges China to increase agricultural imports from the US by $12.5bn in 2020 and by $19.5bn in 2021, bringing China’s US agriculture imports to $40-50bn, almost doubling the American agri-food exports of $24bn to China in 2017, the last year before a trade war between the countries started.