OMAHA (DTN) -- U.S. agriculture and other sectors of the American economy will need to prepare for more trade tensions and likely retaliation from China if Congress follows through on a sweeping set of recommendations to "reset" the relationship between the two countries.
The Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, after meeting for nearly a year, released a wide-ranging list of recommendations Tuesday calling for a "reset" in the U.S.-China relationship, declaring China's economic system "is incompatible" with world trade and undermines U.S. "economic security."
Among the 150 or so recommendations in the report, the select committee called on Congress to pass a bill that would repeal China's Permanent Normal Trade Relations (PNTR) status.
PNTR status essentially grants trade rights with the U.S. and gives countries lower tariffs. The U.S. granted China PNTR in 2000 when China entered the World Trade Organization. Since then, trade between the U.S. and China has exploded into a large trade deficit, making the U.S. more dependent on China.
The recommendations come less than a month after President Joe Biden and Chinese President Xi Jinping met in California, looking for areas where they could cooperate. Still, Biden highlighted to Xi at the meeting that the two countries are also in competition over trade and technology.
The U.S. last year carried a $367.4 billion overall trade deficit with China, but U.S. agricultural exports last year hit a record $38.1 billion in 2022, making China the biggest destination for U.S. farm products.
PREPARE AG FOR RETALIATION
The select committee report lays out a variety of recommendations to essentially prepare the U.S. economy for resetting the country's relationship with China. Among the recommendations, the report states USDA and U.S. Trade Representative's Office should look for "alternative market access for agricultural exports that predominately rely on the PRC (China) market." Congress also should consider providing money to counter the impacts of trade retaliation, the report states.
"Congress should also consider additional appropriations to offset retaliation for farmers and ranchers, U.S. exporters, and other American workers." The report added, "A broader strategy must be developed to support workers to prepare for a period of increased trade tensions and uncertainty."
FARM GROUPS WARN CAUTION
As the House committee was preparing to release its report, a coalition of agricultural groups wrote to lawmakers Tuesday warning the committee not to recommend revoking PNTR status. The agricultural groups specifically warned it would lead to retaliation against U.S. commodities.
"These exports are critical to America's farmers and rural communities," the letter from agricultural groups stated.
Ag groups pointed to the tariff battles in 2018 and 2019 when the Trump administration and China went back and forth on retaliatory tariffs and China essentially stopped buying most agricultural products. The Trump administration spent $23 billion over that stretch in trade aid to farmers.
"By revoking China's PNTR status, Congress would open up U.S. farmers and ranchers to immediate, additional retaliation from China," the farm groups stated.
The farm groups then called on Congress to help open additional market access in the Asia-Pacific region and help diversify the markets for farm commodities. Such efforts to open other markets would decrease U.S. agriculture's reliance on China. "We urge Congress to pressure the administration to work to provide robust new market access across the Asia-Pacific region.
CFIUS AND AG
Beyond China's trade status, the select committee report also called for expanding the sensitive areas in which the Committee on Foreign Investment in the U.S. (CFIUS) operates. That includes codifying the Secretary of Agriculture as a voting member of CFIUS to help examine the sale of farmland or agricultural technology. The select committee also recommends granting new power and jurisdiction for CFIUS over various types of foreign investments.
Agricultural groups have frequently lobbied for USDA to have a permanent vote on CFIUS.
DEFENSE AND TECHNOLOGY
Along with resetting the economic relationship, the report calls for stemming the flow of U.S. capital and technology to China, which is "wittingly and unwittingly" supporting China's defense industry and human-rights abuses. The report also called on the U.S. to invest more in critical technologies and work more closely with allies.
The full report can be viewed at https://selectcommitteeontheccp.house.gov/….
Also see " Smoothing Over China Ag Relations" here: https://www.dtnpf.com/….
Chris Clayton can be reached at Chris.Clayton@dtn.com
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