Phase 1 and North Dakota – Agriculture

There is a great deal to¬†look into with the text of the Phase 1 agreement signed between the US and China and how it impacts the state of North Dakota. Clearly trade agreements this potentially broad present many avenues for impact, such as technology transfer and intellectual property, finance, and agriculture. I will look at the agriculture avenue first given the importance of that area to the state economy. Let’s start first with what are the obligations are. That is, actually, not much.

Most of the paragraphs discuss that the parties “intend” to hold discussions or “intend” to cooperate. “Intending” to cooperate and actually cooperating are two very different things. Much of the guiding principles of the agriculture chapter (Chapter 3) are, simply put, wishes rather than actual clear changes in terms of the negotiations and ongoing discussions.

There is a commitment from China to increase purchases of US goods by over $200 billion over the next two years. Of this total $32 billion will come in agricultural products. The 2018 value for ND exports to China was $22 million, down from $52 million in 2017. Imports from China to ND totaled $171 million in 2018, up from $104 million in 2017.

So the first question I expect to hear from JT is does this mean big changes for ND farms. By my read that is not necessarily the case. Could it? Sure, but there is significantly less in the way of guarantees about it than public statements seemed to indicate. As it stands too ND does not do extensive trading with China. In addition, the Chinese engaged in alternative sourcing for many of these products which means there is no guarantee exactly how they are going to increase purchases.

Manufactured goods get the most increase out of the $200 billion, and energy comes in second. Energy products might represent the best opportunity for immediate gains from the newly signed deal and North Dakota does export significant amounts of energy products.

The biggest takeaway from the Phase 1 text is the following: we did not get much out of this deal that was not available earlier in the negotiations. There seem to be very few real guarantees in place about relations between the countries and mechanisms to audit outcomes. There is a great deal of wait and see here that makes predictions unclear at this point.

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