U.S.-China Phase One Trade Agreement

On Jan. 15, 2020, President Trump and Chinese Vice Premier Liu He signed the U.S.-China “Phase One” trade agreement. The agreement enters into force 30 days from signature (Feb. 14, 2020).

USMEF President and CEO Dan Halstrom issued this statement:
For the U.S. pork and beef industries to expand their business in China, the world’s largest and fastest-growing destination for imported red meat, it is critically important that China follows international standards for pork and beef trade. The Phase One trade agreement lays important groundwork toward this goal, and USMEF thanks the Trump administration for addressing the barriers that have hampered U.S. pork and beef exports to China for many years.

Last year China’s red meat imports exceeded $14 billion, a 65% increase from 2018. The U.S. industry looks forward to capturing a greater share of this rapidly growing market.

The text of the agreement and industry-specific fact sheets are available from the USTR website. Highlights include:

• China recognizes the U.S. traceability system and will no longer require the third-party verified traceability program that was agreed to in 2017.
• Within one month of entry into force, China will expand access to include beef from cattle of all ages and broader scope of cuts (with the exception of those below).
• Within one month of entry into force, China will recognize Codex maximum residue levels (MRLs) for synthetic hormones (zeranol, trenbolone acetate and melengestrol acetate).
• Within 10 days of entry into force, China will permit all pork and pork products inspected by FSIS.
Processed products
• China will allow the importation of all red meat and poultry processed meat products upon entry into force.
Plant approvals
• China will recognize all FSIS inspected establishments as eligible to export red meat and poultry products to China.
• However, China will still maintain a list of plants for China Inspection and Quarantine (CIQ). FSIS will notify China of plants eligible to export and China must update their list of plants within 20 days of receipt.
• China will conduct a risk assessment for ractopamine in cattle and swine in coordination with U.S. experts to be conducted as soon as possible.
Ineligible Products
• Beef and pork products not eligible for importation into China include: thyroid glands, adrenal glands, uropygial glands, tonsils, major lymph nodes exposed during slaughter and cutting, laryngeal muscle tissue, lungs, pancreas, spleen, gallbladder, uterus, hair, hoofs, and lactating mammary glands, horns from cattle, mechanically separated beef and distal ileum from cattle of any age, brain, skull, eyes, trigeminal ganglia, spinal cord, dorsal root ganglia, and vertebral column from cattle 30 months of age and older (excluding the vertebrae of the tail, the transverse processes of the thoracic and lumbar vertebrae, and the wings of the sacrum). These items are also ineligible when incorporated into further-processed products.
Retaliatory duties
No details were released on retaliatory duties on U.S. pork and beef. So for the time being, China’s retaliatory duties remain in place. The total rate for U.S. chilled and frozen beef cuts is 47% compared to 5% for Australian beef and zero for New Zealand beef. The rate for frozen pork cuts is 68% compared to 8% paid by all major competitors and zero for Chilean pork. The rate for most variety meats is 72% compared to 12% for most other suppliers.

The agreement includes commitments for China to make additional agricultural purchases: $12.5 billion above the 2017 base in Year 1 and $19.5 billion above the 2017 base in Year 2. The agricultural purchases list includes broad categories such as oilseeds, meat, cereals, cotton and seafood, as well as an “other ag commodities” category that includes products such as distiller’s dried grains with solubles (DDGS), ethanol, fruit, vegetables and nuts.