Phase One China Agreement

U.S. President-elect Joe Biden will not immediately end the trade deal with China or reduce President Donald Trump`s punitive tariffs on Chinese products, the New York Times reported Wednesday. We are taking an important step – which has never been done before with China – toward a future of fair and reciprocal trade, as we sign the first phase of the historic U.S.-China trade agreement. Together, we are correcting the injustices of the past and creating a future of economic justice and security for American workers, farmers and families. Under the agreement, China has committed to purchase as much as $63.9 billion of U.S. covered goods by the end of 2020 compared to those basic plans for 2017. The definition of the baseline for 2017 based on Chinese import statistics implies a purchase target of $173.1 billion for 2020 (in red in panel a). The definition of the baseline for 2017 based on U.S. export statistics implies a target of $159.0 billion by 2020 (blue in panel a). All these obstacles and complications lead to political failure. Regardless of who is president, the United States must get China to liberalize its tariffs, reduce non-tariff barriers, and streamline its subsidies and other practices that distort economic incentives. In response to Trump`s trade war, China imposed additional tariffs on more than 50 percent of U.S.

exports in 2018 and 2019. It is mysterious that the legal text of the first phase of the agreement did not remove, reduce or even mention the word „tariffs,“ and it did little to address the major trade problems that the United States has with China. Instead, the Trump administration has provided an excellent case study on why simple purchase commitments can`t go around. The agreement prohibits coercion or pressure on foreign companies to transfer their technology as a precondition for market access, authorisation or benefits. The agreement also requires that any transfer or license of technology be based on voluntary market conditions and reflect mutual consent. There is little evidence that the Trump administration is implementing such a plan. The phase one agreement was a way for Trump and Chinese President Xi Jinping to end their economic conflict, which served the internal interests of both sides. But overall, its impact will be limited. Even in the weeks since the signing of the agreement, it has been overshadowed by events such as the coronavirus outbreak in China and the upcoming U.S. elections in 2020.

As the narrative of the „trade war“ fades, the „technology war“ is at the center of concerns: Washington is proposing increasingly inventive and aggressive measures to limit Huawei`s control over global 5G networks. From the beginning, an additional $200 billion in sales to China were a worrying goal. Nearly 30% of U.S. merchandise exports to China are not even covered by the Phase One agreement. And for those who covered the agreement, a review of 15 product groups shows that their sales to China have been influenced by various factors, including plane crashes, epidemics of outbreaks, export controls, World Trade Organization (WTO) legal decisions, the lingering effects of trade war tariffs and the pandemic. The Phase 1 agreement does not cover nearly 30% of the products that the United States exports to China.