Trade Mentioned, Not a Focus of Biden-Xi Talks as China Warns U.S. It's 'Playing with Fire' on Taiwan

High-level talks between the U.S. and China yielded no major outcome Monday night. The conversation between U.S. President Joe Biden and his Chinese counterpart Xi Jinping covered a host of hot-button issues from human rights to crypto mining, and while the Phase One trade agreement was brought up by Biden, trade wasn't a high priority during Monday's virtual face-to-face meeting..

This was the third time the two leaders have spoken since Biden took office in January. The meeting, which occurred Monday night in the U.S. and Tuesday morning in China, lasted for more than three hours, which was longer than expected. 

Talk about Trade

While the U.S. went into the high-level conversation saying the Biden administration didn't expect any major announcement from the meeting, it's no secret the relationship between the U.S. and China has been turbulent over the past five years. But as the Trump administration struck a Phase One trade agreement, which went into effect Jan. 1, 2020, trade doesn’t appear to be a top priority for the Biden administration.

Leading into the meeting, trade wasn't expected to be a major point, but the White House says Biden did bring trade concerns to the conversation, calling on China to fulfill its commitments under a Phase 1 trade deal. Biden said that he was clear with Xi about the need to protect American workers and industries from what the White House called China’s “unfair trade and economic practices."

“We’re glad that they're talking, because there's a lot of issues to manage in between the United States and China right now,” says Stephen Censky, current American Soybean Association (ASA) CEO, after serving as USDA Deputy Secretary in the Trump administration. “And our message to the Biden administration has been that it is in our economic interest to keep trade going with China, even as we navigate these very large issues that are going to be on the agenda, whether it's Hong Kong or the treatment of the Uyghurs in the Xinjiang province or Taiwan, South China Sea, the great power competition, and industrial subsidies. I mean, it's a long list of issues that we have with China. But still, it is in our economic interest to keep our trade going.”

While ag groups push for trade to remain a large focus for the Biden administration, tensions have been growing between the U.S. and China, with some of those hot-button issues in focus during the meeting. The video teleconference discussion was described by both sides as frank and direct. During the meeting, the U.S. was warned China would respond to provocations on Taiwan, according to official accounts of the conversation, and that American support for Taiwan was “playing with fire.” The Chinese warned that dividing the world into alliances or blocs, a strategy that’s been communicated by the Biden administration when discussing its approach to challenging China, would “inevitably bring disaster to the world.”

With no reported progress on trade issues during the virtual summit, some accounts of the meeting say the two sides struck a hopeful note about the potential for future deals. An official Chinese statement said  Xi described the bilateral trade relationship as “mutually beneficial” while calling for trade not to be politicized, but didn’t mention the Phase One agreement by name.

Phase Two Trade Deal in Sight? 

And as Phase One that is coming up on its deadline at the end of the year, agricultural groups are urging the Administration to continue to press China on not just Phase One, but the potential of another trade agreement between the two sides.

“We're hoping that the administration really engages China, and I ask them to make sure that they're living up to all aspects of the Phase One agreement,” says Censky. “And then No. 2, talk about where do we go from here after the Phase One agreement expires at the at the end of the year. We would like to see engagement on a Phase Two.”

Censky says with biotech issues and other portions of the Phase One agreement still absent from China’s actions, he doesn’t see Phase Two negotiations or talks as a strong possibility in the near future.

“I think they're really looking at just enforcement and having China live up to the Phase One agreement, which is fair enough,” says Censky. “We believe, as well, that China should live up to those commitments that they made. But we also need to encourage the administration, even though they're not talking about this, that again, we need to be talking about engaging with China and saying, ‘OK, what comes next?’”

Phase One Progress

So, just how does China stack up overall in terms of its commitments under the Phase One agreement? According to the Peterson Institute for International Economics (PIIE), which produces a chart that tracks China's monthly purchases of U.S. goods covered by the deal, as of September 2021, China's purchases of all covered products reached 62% of Chinese imports, or 60% of the U.S. export targets.

While soybean sales have created doubts on just how much China will end up sourcing over the next year, Sheldon says to date, overall agricultural exports destined for China look to miss the mark. But there are bright spots in the overall story. 

"In terms of agricultural exports, it looks like for 2021, we're going to hit about 84% of the commitments that China made to import. So, a lot of that is going to be dependent as we go out through the end of the marketing year, and particularly how much corn and soybeans are exported to China.”

However, it's commodities like corn, wheat and cotton that seem to be driving the boost in China's appetite in 2021. 

“If you look at exports to China across commodities, soybeans are not hitting the target that they were expected to hit. Then, corn is way over target, we're talking about 1,000% higher than where it was expected to be, along with our pork exports that have been very strong to China, as well as our wheat exports and our cotton exports. So, you have to sort of look at it in the aggregate and by commodities, as well.”

Censky says considering the amount of soybeans China has imported to date over the past two years, he gives the Phase One agreement a “B” grade for soybean buys.

“They have come very close to fulfilling their commitments that they made for soybeans. They didn't quite make it. So, I'm not going to give them an ‘A’ there. Also, there are a few outstanding issues,” he says. “Take for example their approval of new biotech varieties and traits. They have not fully implemented their procedures to make sure that those approvals are timely. And so I'm going to give them a ‘B’, when it comes to soybeans. For agriculture, overall, they could probably do better. I know some commodities are feeling like China did not live up to their commitments.”