THE ‘PHASE ONE’ trade agreement reportedly (update: now confirmed) struck between China and the United States amounts to little more than an invoice for a barter sale: the United States exchanging a suspension of new tariffs and a rollback of some old ones for the annual purchase of some $40 billion-50 billion worth of additional US farm produce and some promises on intellectual property and currency.
New US tariffs on $160 billion worth of Chinese imports were due to have come into force on December 15, adding to the existing 25% tariff on goods worth $250 billion and 15% tariff on products worth $110 billion. Neither side wants the economic pain that brings (higher prices for Chinese goods in the United States, retaliatory tariffs on US firms selling to China, and diminished exports for Chinese firms). A truce is mutually advantageous, as the US concession to China on reducing existing tariffs indicates.
US President Donald Trump will present this as an outstanding victory for himself, as is his wont. However, the core issues between the two countries— intellectual property protection, technology transfer rules, market access and industrial subsidies — remain substantively unresolved, and no easier to reconcile except on Beijing’s timetable for the structural adjustment of China’s economy.
Update: Details remain few and far between. US President Donald Trump has tweeted that the December 15 tariffs will not be imposed, the 25% tariffs will continue and the 15% tariffs cut to 7.5%. The Chinese side is being as opaque, saying little more than Washington and Beijing “have agreed on the text of a phase one economic and trade agreement based on the principle of equality and mutual respect”.
Further update: The Wall Street Journal quotes U.S. Trade Representative Robert Lighthizer briefing that China will over the next two years buy an additional $32 billion worth of US farm produce, taking purchases to $40 billion a year as part of a package designed to raise US exports to China by $200 billion over the two years. Curiously, Lighthizer said that the exact products involved will remain classified. He was similarly coy over the details of Beijing’s specific commitments on intellectual property, including counterfeiting, patent and trademark issues and pharmaceutical rights. These he said would be announced in the future.
‘Phase two’ negotiations are to start straight away, according to Trump’s tweets. Phase one is not likely to be signed until next month as it will still require ‘legal review, translation and proofreading’ by both sides, according to state media — providing a last-minute opportunity for details to be lost or found in translation, no doubt.