The United States and China signed a historic and enforceable agreement on a Phase One trade agreement on January 15, 2020. The agreement requires structural reforms and other changes to China`s economic and trade regime. On April 28, 2009, the chinese and Peruvian governments signed the China-Peru Free Trade Agreement in Beijing. The China-Peru Free Trade Agreement, which entered into force on January 15, 2010, is the first comprehensive free trade agreement that China has signed with a Latin American country. But the deal preserves most of the tariffs imposed by Mr. Trump on $360 billion of Chinese goods, and it maintains the threat of additional sanctions if Beijing does not abide by the terms of the deal. The trade deal contains a variety of victories for U.S. industry, including opening up markets for biotechnology, beef and poultry. Banks, insurers, pharmaceutical companies and the energy industry are also big beneficiaries. The deal ends more than two years of tense negotiations and growing threats that sometimes seemed destined to plunge the United States and China into permanent economic warfare. Mr.
Trump, who ran for president in 2016 on a promise to crack down on China, urged his negotiators to rewrite trade conditions that he said had destroyed American industry and jobs, and he imposed record tariffs on Chinese goods in a bid to get Beijing to comply with its demands. The two countries began negotiations on a free trade agreement in April 2007 and signed the agreement in April 2013, in the presence of Chinese Premier Li Keqiang and Icelandic Premier Johanna Sigurdardottir. China`s economy has recovered more strongly in 2021, with the latest forecasts for this year`s GDP growth at around 8%. However, China`s first-phase purchase commitments have also been pushed back, with more expansionary spending on U.S. exports forecast for 2021, more than 50 percent more than in 2020. From January to October 2021 alone, U.S. exports to China increased slightly from 2020, to 61% of the proportional target for 2021 (see Bown 2021, Figure 2). But despite the improvement in its economy, China has not been able to catch up. China is Australia`s largest trading partner, with the reciprocal flow of goods and services exceeding $135 billion in 2014. Regarding the energy purchases in the deal, Trump told Senator Joni Ernst, the Iowa Republican who was present, «You have ethanol, so you can`t complain.» The Phase One Economic and Trade Agreement includes a chapter on intellectual property (IP) that strengthens the protection and enforcement of intellectual property in China. The deal has been criticized by leading Democrats, including Sen. Chuck Schumer of New York, who criticized the deal for failing to address Chinese state-owned enterprises and industrial subsidies.
He suggested that President Xi was privately mocking the United States and that China was «taking President Trump to the cleaners.» While updates on the trade war have intrigued investors for much of the past two years, the official signing of the deal has been greeted with a shrug. The S&P 500 rose about 0.2%. A number of semiconductor companies that have been particularly sensitive to the trade war have fallen more than 1%. China`s purchase commitments in the energy sector were also problematic as they only covered carbon-intensive energy products. While President Trump did not share concerns about climate change, the Biden administration joined the Paris Agreement and appointed former Secretary of State John Kerry as climate commissioner. Continuing to push China to buy an increasing amount of U.S. fossil fuel exports would be inconsistent with broader goals of encouraging China to stop building coal-fired power plants and decarbonize its economy. Another area addressed by Tai was the need to «work with allies to shape the rules of fair trade in the 21st century and enable a race to the top for market economies and democracies.» The statement follows the September summit that kicked off the new US-EU Trade and Technology Council (TTC). The joint statement from the TTC meeting outlines U.S.-EU plans to work together to address «policies and practices that do not distort the market and pose particular challenges to workers and businesses in the U.S.
and the EU,» though there are also no details on how they occur. But these victories come at a high price. The uncertainty created by tariff threats and M. Trump has weighed on the economy, raised prices for businesses and consumers, stunted business investment and slowed growth around the world. China-exposed companies, such as Deere & Company and Caterpillar, have laid off some employees and lowered their sales forecasts, in part due to the trade war. Yilin Wang provided excellent data support, Melina Kolb, William Melancon and Oliver Ward helped with the charts. U.S. Trade Representative Robert Lighthizer said further negotiations would depend on how the Phase One agreement is put into practice. «We need to make sure this is implemented properly,» Lighthizer said. «This is the first agreement of its kind and we need to make sure it works. The two sides did not immediately distribute copies of the agreement in Chinese, raising the question of whether the translation issues were fully resolved and whether the final text of the Chinese version would be as demanding of the Beijing government as in the English version.
China has also agreed not to force U.S. companies to give up their technology as a condition of doing business there under the threat of new tariffs. And it will refrain from asking its companies to obtain sensitive foreign technologies through acquisitions. The agreement also includes a commitment by both countries not to devalue their currencies in order to gain an advantage in export markets. Finally, despite the recovery in agriculture, it is worth remembering that the Trump administration wanted China to buy an additional $10 billion of U.S. agricultural products that it could not include in the deal. Annex 6.1, footnote b, of the Legal Agreement states (emphasis added): «At the request of the United States, China shall seek to purchase and import $5 billion per year of U.S. agricultural products covered by this Chapter, in addition to the minimum quantities set out in this Chapter.» (Including the additional $10 billion, U.S. exports would account for only 71 percent, not 83 percent of the target.) In her announcement, Tai said she would «soon discuss with China its performance under the Phase One agreement. China has made commitments that benefit certain U.S. industries, including agriculture, and that we must enforce. A key part of the deal called for China to buy an additional $200 billion by the end of 2021, not only in U.S.
agriculture, but also in exports of manufactured goods, energy, and services. Law enforcement is crucial as China is on track to buy just over 60% of the promised goods. USTR Tai has identified three other efforts by the Biden administration in addition to implementing China`s commitments under phase one agreement outlined in the «scoreboard» provided here. U.S. industrial exports are the most important economic component of Phase One agreement, accounting for 70% of the goods covered. Nevertheless, U.S. exports of industrial products accounted for only 60% of the proportional sales target from January 2020 to October 2021 (Figure 2). The United States and China have reached a historic and enforceable agreement on a Phase One trade agreement that requires structural reforms and other changes to China`s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, currency and currency. The Phase One agreement also includes a commitment by China to make significant additional purchases of U.S. goods and services in the coming years.
It is important that the agreement establishes a robust dispute settlement system that ensures swift and effective implementation and enforcement. The United States has agreed to substantially amend its tariff measures under Article 301. China`s monetary policy has been another hot topic, as China has deliberately kept its currency undervalued for many years. However, China has moved to a more market-based exchange rate, but China`s monetary policy is still being closely watched. Other issues affecting bilateral trade flows include China`s industrial policies favoring state-owned enterprises, disagreement over China`s WTO commitments, and the failure to protect U.S. intellectual property rights. The «phase one» trade deal between the United States and China was officially signed wednesday at a ceremony with U.S. President Donald Trump and Chinese Vice Premier Liu He. A White House press release touted the deal as a «historic deal» that «will begin to rebalance our important trade partnership with China» and «give an incredible boost to U.S. businesses, farmers, manufacturers and innovators.» Negotiations on the free trade agreement began in September 2004, when the trade ministers of the two countries met on the margins of ASEAN plus three meetings of economy ministers. The first round of negotiations was launched in May 2012. The two sides signed the free trade agreement in June 2015 after 14 rounds of negotiations.
The agreement is an important turning point in U.S. trade policy and the types of free trade agreements that the U.S. has generally supported. Instead of lowering tariffs to allow the flow of goods and services to meet market demand, this agreement leaves a record level of tariffs and requires China to buy $200 billion worth of certain products within two years. .