Fri, Jan 17, 2020 - Page 10 News List

Questions remain after US-China ‘phase one’ deal

ROUGH ROAD AHEAD:Analysts said the next phase would not be done soon, after the first deal left tariffs in place and failed to address US complaints over subsidies


The “phase one” trade deal between Washington and Beijing was the result of long, fraught negotiations. “Phase two” is likely to be just as bumpy and unpredictable.

The agreement signed on Wednesday marks a ceasefire in the nearly two-year-old trade dispute, but many questions remain. Here are some of them:


The deal “makes both countries look good,” Moody’s Analytics economist Xu Xiaochun (徐曉春) said.

US President Donald Trump, who faces an impeachment trial, can point to the pact as a success in his campaign to win a second term in office this year.

For Chinese President Xi Jinping (習近平), it removes a thorn in his side as he already has to deal with other pressing issues including political unrest in Hong Kong and a slowing economy.

Under the deal, Beijing agreed to import US$200 billion of US goods, including US$32 billion of farm products and seafood — a win for Trump as he will seek support from agricultural states in his election battle.

However, Xu said that much of China’s other concessions — such as improvements in intellectual property protection and financial liberalization — were already in the works.

“China doesn’t seem to have made any concessions that it was not willing to in the first place,” he said.


Although China has committed to importing more, in areas from manufactured goods to energy goods, analysts noted that domestic demand might be a limiting factor.

Analysts say the nation’s economy is expected to have slowed to 6.1 percent last year, the worst performance in 30 years.

“Unless Chinese demand for US agricultural goods and energy rises drastically, China would have to use state policy to substitute agricultural and energy imports from other exporting nations with imports from the US,” ING Bank NV economists Timme Spakman and Iris Pang (彭藹嬈) said in a note.

The analysts also said that the agreement “does not include an enforcement clause addressing the purchasing commitments by China.”

The text of the deal makes clear that purchases would be based on commercial considerations and “that market conditions, particularly in the case of agricultural goods, may dictate the timing of purchases within any given year.”


Trump on Wednesday said that he planned to visit China in the “not too distant future.”

While tariffs on hundreds of billions of US dollars of Chinese goods remain in place for now, the US leader said he would be willing to take them off “if we’re able to do phase two.”

However, the next round of talks is already looking complicated, with Trump distracted by the November election and an impeachment trial in the US Senate.

The president said earlier this month that a deal might have to wait until after the vote.

“We are not certain that the US has an incentive to continue quickly,” Xu said.

Beijing does not have a reason to drag things out as it is likely to face a tough stance from Washington, whether Trump or a Democrat is president, Xu said.


The short answer is no.

The deal largely leaves tariffs in place and it fails to address US complaints about China’s huge subsidies to state enterprises.

“While it’s a start, the deal fails to cover the significant issues that prompted the war in the first place,” Stenn Group president Kerstin Braun said.

The trade fight has also proved to be a battle for high-tech supremacy, which is likely to continue intensifying.

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