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Dec. 10, 2019, 2:40 p.m. EST

Why U.S.-China trade talks are going down to the wire (and that’s just ‘phase one’)

Analysis: Trump wants hard China promise to buy farm goods

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By Jeffry Bartash, MarketWatch

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Even though U.S. farmers were able to find other buyers for most of their harvest, U.S. soy exports still fell 13% to 51 million metric tons in 2018 from a high-water mark of 59 million metric tons in 2016, according to the American Soybean Association.

The Trump administration has tried to cushion the harm on farmers by escalating federal support. Farmers have received about $20 billion in aid in 2018 and 2019, the lobbying group American Farm Bureau Federation calculates.

Still, it hasn’t been enough.

Even before the trade war, farmers endured a prolonged slump in global prices. Soybeans fetched as much as $14.40 a bushel in 2012 before average prices fell to as low as $8.95 in 2015. They have ranged from $8 to $10 a bushel the past few years.

Lately, farmers have also been hurt by poor weather and historic floods that have contributed to a spike in bankruptcies. The trade war has left farmers little leeway for further misfortune.

Perhaps the biggest worry of American farmers, however, is that China will permanently increase its share of soybean and other agricultural purchases from rivals such as Brazil.

“The more time that passes, the more difficult it will be to win back this important export market, regardless of any trade agreement,” said Zippy Duvall, president of the farm bureau.

The White House is seeking a firmer commitment from China in part to avoid exactly that, but China doesn’t want to be locked into future promises if it’s economy worsens. Global rules governing free trade also make such purchasing quotas suspect.

The Trump administration, meanwhile, has refused to agree to the appointment of new judges for a key panel at the World Trade Organization that arbitrates those sorts of trade disputes. If more judges aren’t added, the WTO would effectively become toothless.

Whatever the case, a broader resolution to the trade dispute still appears distant even if the two countries find common ground on farm products ahead of the looming deadline. The countries are farther apart on copyright protection, technology transfers and Chinese subsidies for state-owned companies.

Put another way, the trade tensions will linger for a lot longer and remain a drag on the global superpowers, a fact that could have knock-on effects for economies throughout the world.

“While we assume that the U.S. and China will finalize a phase one trade deal, this is unlikely to boost growth much, if at all,” said economists at Capital Economics. “What’s more, fundamental differences between the two sides will mean that tensions persist in one form or another into next year and well beyond.”

Jeffry Bartash is a reporter for MarketWatch in Washington.

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