US-China trade deal: what’s in and what’s missing?
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The US and China announced Friday
that they reached a Phase-1 trade deal but provided little detail on what
exactly will be part of the agreement.
US Trade Representative Robert
Lighthizer brought a print-out of the 86-page agreement to a briefing with
reporters Friday afternoon as a show-and-tell to prove that its all done and
written up. Lighthizer said its an important step forward for the two
countries, while acknowledging that a lot of big issues are outstanding, and
need to be addressed in future negotiations.
Here’s what we do and don’t know:
Tariffs
As part of the deal, the US will
halve its 15 per cent tariff on about $120 billion in Chinese goods. It will
also suspend indefinitely planned duties that were set to take effect on Sunday
that would have covered consumer favourites such as smart phones and laptops.
That leaves roughly $250 billion
taxed at 25 per cent and $120 billion that will be subject to a 7.5 per cent
duty once the agreement takes effect. Any further tariff reductions by the US
will be linked to the conclusion of future phases, Lighthizer said.
China, on the other hand, did not
agree to specific tariff reductions in the deal. Instead, the nation’s
obligation is to make the purchases and to have an exclusion process for its
tariffs. The country has in recent months lowered some retaliatory tariffs
including some on cars imported from the US.
Purchases
A USTR fact sheet refers to this part
of the deal as the ‘Expanding Trade’ chapter.
According to the US, China has agreed
to increase its total purchases of US goods and services by at least $200
billion over the next two years. Also included is a commitment by China to
increase its buying of US agricultural products to $40 billion to $50 billion
in each of the next two years.
Lighthizer told reporters these are
numbers that are realistic and that we arrived at together. The specific
breakdown of targets for individual commodities will be classified and not
disclosed to the public.
IP, forced tech transfer
The deal will centre around what a senior
administration official called state-of-the-art IP commitments and a
breakthrough on forced technology transfer. Those issues are also at the heart
of an investigation that led President Donald Trump to raise tariffs on China
in the first place.
Among the specific commitments USTR
announced Friday: China has agreed to end its long-standing practice of forcing
or pressuring foreign companies to transfer their technology to Chinese
companies as a condition for obtaining market access, administrative approvals,
or receiving advantages from the government.
China also commits to provide
transparency, fairness, and due process in administrative proceedings and to
have technology transfer and licensing take place on market terms.
Enforcement
The agreement will include a
dispute-resolution mechanism that will serve as the enforcement arm. That
process is in line with how other US trade agreements are enforced.
Complaints of one party will be
brought to a US-China working group and if officials can not resolve their
dispute, a decision will be made at the ministerial level of what action to
take. That action could include tariffs or other measures, Lighthizer said,
though he sounded optimistic that he thinks China will keep their promises.
What comes next?
Lawyers are now reviewing the text so
that its ready to be signed in the first week of January. Its also being
translated. Lighthizer and his counterpart Vice Premier Liu He will likely do
the signing in Washington. Once its inked, the deal will take effect roughly 30
days later.
Phase-2?
The US President announced on Friday
that negotiations for the next phase would start immediately, though his trade
chief said no date for future talks had been set.
The first phase leaves contentious
issues unresolved, including US demands that China curb subsidies to
state-owned firms. The US says future talks will also focus on digital trade,
data localization, cross-border data flows and cyber intrusions.
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