(Economic Outlook and Policy Series) If the U.S. does not step back from ‘power-based’ bargaining: What are the potential implications for agricultural trade?

Adoption by the US of “power-based” bargaining led to agricultural import commitments by China under the Phase 1 Trade Agreement.  Contracting directly over market access is superficially appealing, but evaluating whether China has met its import commitments must control for other shocks to demand and supply. Since the Agreement went into place in 2020, US agricultural exports have been affected by rebuilding of China’s hog industry, and it can be expected that the supply shock due to Russia’s invasion of Ukraine will have a significant spillover effect on global agricultural trade and hence China’s agricultural imports. The bottom line is that unlike the trade remedies available under the WTO, disciplining commitments made under “managed trade” will likely be challenging.

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