China has agreed to start importing American chickens again in a move to help ease trade war tensions with the United States. Photo: Scott Olson / Getty Images / AFP

In the trade war game of chicken, China appears to have blinked first.

Yet necessity, not shredded nerves, appears to be behind the move to lift a five-year ban on poultry imports from the United States. Still, the decision will play well in Washington and reinvigorate talks for a phase one agreement.

“The United States welcomes China’s decision to finally lift its unwarranted ban on US poultry and poultry products,” Robert Lighthizer, the US Trade Representative and a key player in discussions with Beijing, said.

“This is great news for both America’s farmers and China’s consumers,” he added before predicting that poultry exports to China could surpass US$1 billion a year.

To put that into context, Beijing blocked US poultry imports, such as chickens, turkeys and ducks, a month after an outbreak of avian influenza in 2014. The market was worth $500 million.

But since then, China has been hit by an African swine fever epidemic, which has decimated the domestic pig sector and sent meat prices soaring.

Rising food costs have also come at a time when the country’s economy is slowing. A raft of data released this week by the National Bureau of Statistics showed the depth of the downturn as the Sino-American conflict starts to bite.

Read: Xi blasts protectionism as China’s economy slumps

Read: China and the US inch their way to a deal

On Tuesday, Premier Li Keqiang warned of the challenges ahead at a meeting with economists and policymakers.

“The current external environment [has become] more complex and severe, with increasing downward pressure on the domestic economy, rapidly rising prices of pork and other products, and increasing difficulties in the business operations of companies,” he said as reported by the Chinese media.

Further signs of stress were highlighted 48 hours later with consumer spending, factory production and investment tumbling in October.

To complete a picture shrouded in dark grays, GDP growth in the third quarter dipped to 6%, the slowest rate in nearly three decades.

“Trade negotiations between Washington and Beijing have remained inconclusive. It is unlikely for the US to remove the tariffs. The phase one trade deal has centered on agricultural products which will benefit both China as it seeks relief from [the African] swine fever [outbreak] and the US by appeasing farmers,” Samuel Tse, an economist at DBS, the multinational banking and financial services group based in Singapore, said.

“Core disputes such as forced technology transfer and greater financial market accessibility remain unsolved,” he added.

At least there was a shard of light piercing the gloom when the Ministry of Commerce issued a slightly more upbeat statement.

“[China] was willing to work together with the US … and to create conditions for the first phase of the agreement,” Gao Feng, a ministry spokesman, told a regular media briefing in Beijing earlier this week.

“If the two parties reach a first-phase agreement, the extent of the tariff cancellations should fully reflect the importance of the first phase agreement,” he added. “The two sides are discussing this issue in depth.”

Sticking point

Of course, that is the sticking point.

So far, Washington has slapped increased duties on more than $500 billion of Chinese imports. In response, Beijing has added tariffs on US goods and products worth around $110 billion.

Before a limited agreement can be signed within a broader trade deal, President Xi Jinping’s government is insisting that tariffs are gradually rolled back. But the White House has balked at the idea, fearing that China will renege on key issues.

While talks have continued, both sides are locked in a stalemate. Chicken diplomacy might just help break the impasse.

“Today’s development [on US poultry] is definitely linked to the trade war and, though the progress is incremental, it is positive and resolves a longstanding irritant in the trade relationship,” Jeff Moon, a former US diplomat and trade official and now president of the China Moon Strategies consultancy, told the Associated Press news agency.

In the end, Beijing’s fowl move might just have sweet-smelling implications.

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