Coronavirus May Impact Chinese Purchases of US Ag Goods, Top US Official Says

The coronavirus outbreak could impact China’s purchase commitments involving U.S. agricultural products under the phase one trade deal, White House national security adviser Robert O’Brien said. The virus could have its biggest impact on the first year of the deal, O’Brien said, which was expected to include $40 billion in U.S. agricultural exports to China (see 2001150073). The virus may also impact what the U.S. Department of Agriculture secretary said would be a “record year” for U.S. agricultural exports (see 2001210031).

“As we watch this coronavirus outbreak unfold in China, it could have an impact on how big, at least in this current year, the purchases are,” O’Brien said during a Feb. 11 event hosted by the Atlantic Council. Although the virus will likely have an immediate impact, O’Brien said the deal will bring benefits to U.S. exporters “over time” once the coronavirus fades. He also touted the deal’s provisions on other Chinese commitments, including enforcement of intellectual property rights and Chinese purchase commitments of other U.S. goods. The coronavirus “could have an impact on the phase one deal, but it’s not going to change the phase one deal,” he said. “I think it's a great deal, it’s going to be a very good deal for us down the road. But it may not have as big of an immediate impact -- a year-one impact -- as we'd hoped because of the coronavirus.”

O’Brien said he is “absolutely” concerned about the virus’ impact on global supply chains, especially considering the “critical role” China plays in the world economy. “My guess is that this virus will have some effect,” he said. “We’ll have to wait and see how it plays out and whether alternate suppliers can be found.” The virus’s impact on U.S. exports could be mitigated by the fact that China is also dealing with African swine fever, which has reduced the country’s pork supply and which may lead to more U.S. pork exports, O’Brien said. “It has hurt the pork industry in China,” he said. “They have a need to import food, and we expect the phase one deal to allow China to import more food and open those markets to American farmers.”

O’Brien also touched on Chinese technology issues and expressed disappointment at the United Kingdom’s decision to allow Huawei to supply a portion of its communication infrastructure (see 2001280074). He applauded decisions by Japan, Australia, New Zealand and others to reject Huawei equipment. “I think the U.K. understands the [Huawei] threat,” O’Brien said. “They think they can mitigate the threat, and that's a difference of opinion.” The Commerce Department added Huawei to its Entity List last year (see 1905160072), and a temporary general license for the technology company, which has been renewed twice, is set to expire Feb. 16 (see 1911180036).

Allowing Huawei to supply the U.S. communication networks would render any future Chinese trade deals useless due to the data that China would likely steal, O’Brien said. “If you want to put Huawei in there, people have told me to forget doing a phase two trade deal, forget about technology transfer agreements, forget about patent protection, those sorts of things,” O’Brien said. “Because if China controls the system, they'll take everything ... that comes up to the cloud through 5G. We don’t think that's good for our country, we don't think that's good for our allies.”

The U.K. wants to see “market alternatives” to Huawei, O’Brien said, and may be persuaded to switch to another provider. O’Brien said several U.S. and international companies are “working hard” to become an alternative, including Dell, Microsoft, Qualcomm, Ericsson and Nokia. “I think we’re ahead of the Chinese technology-wise, but I think we’re behind them in having a commercially available off-the-shelf system available to purchase,” he said. “But I think the private sector will catch up on that front.”