On January 15th, the press reported that President Trump had signed an initial trade deal with China, coming on the heels of an 18-month trade war. While the deal is significant for global markets, it’s also spurred great interest from the U.S. cannabis sector. It stipulates that in 2020 China must purchase $12.5 billion worth of more than 200 U.S. agricultural commodities, and then $19.5 billion more in 2021. The agreement defines this as, “True hemp (cannabis sativa l.) raw or processed but not spun; tow and waste of true hemp (including yarn waste and garnetted stock).”
When it comes to U.S. hemp production, President Trump has effectively said, “Let it grow.” The 2018 Farm Bill falls in line with other “America First” policies, in which American-based hemp derivatives are positioned to dominate the domestic market for as long as Republicans control the legislative and executive branches.
So is this trade agreement good or bad for the emerging U.S. industrial hemp industry? It’s certainly not a bad thing. Striking a deal that requires opening China to import American-grown hemp. means American hemp farmers, processors, and entrepreneurs are poised to grow, which is all positive. Any trade deal requiring another country to import a staple commodity is significant.
Historically, China has been the world leader in hemp production for fabric and textiles. Cannabis grown for other applications in the People’s Republic has raised a number of issues. Recently, hemp derivatives and biomass imported to the U.S. from China tested for high levels of pesticide particles and heavy metals. American hemp companies took note of this, as did regulators.
But let’s not forget a recent trade agreement cautionary tale. A few years ago, Canadians hemp growers produced an enormous amount of hemp grain for a trade deal with South Korea. When the deal fell through, it left Canada’s hemp farmers reeling. Be smart, be wary.
Still a major question remains: what products will be sold to Chinese consumers? Is it CBD and other hemp derivatives and hemp seed oil – or is it just textiles and other non-consumptive items? The answer is evolving as we speak. Lately, we’ve seen a spike in China’s consumption of CBD, but that’s been put on hold until clear rules are established. It’s safe to assume that shipping costs will also impact what products will ultimately be competitive in China’s consumer market.
Renegotiating longstanding trade agreements is akin to shopping around for competitive car insurance rates when your policy is about to expire. Yes, these efforts have been wonky, and led by a controversial president, but this deal has remarkable significance beyond its simple requirements. The net effect looks very beneficial for American farmers and for America’s place within the global market for this emerging agricultural commodity.
As a global leader in hemp production, the U.S. is positioned favorably and if things keep on truckin’, the U.S. could soon challenge China’s as the leader. This projection is exciting and truly indicates that hemp can become a global industry — built to last.