China’s purchase of USD 200 billion worth of additional American products over a period of two years is part of the “Phase One” trade deal with Beijing, the U.S. said, as the world’s two top economic powers look forward to ending their bitter two-year tariff war this week.
President Donald Trump announced last week that the U.S. will sign the first phase of a pending trade deal with China “probably” on January 15. “We’re signing, as you know, a very big deal among many other things with China...probably on January 15,” Mr. Trump told reporters at a White House event.
China’s commerce ministry on Thursday last confirmed that Vice-Premier Liu will be in the U.S. capital from Monday to Wednesday to sign the “Phase One” trade deal with the U.S. The deal signals a de-escalation in a trade war that has lasted between the two economic giants for nearly two years.
The deal includes the China’s purchase of $200-billion worth of additional American products, U.S. Treasury Secretary Steven Mnuchin said on Sunday.
In an interview to ABC News , he said, “It is $200 billion of additional products across the board over the next two years and specifically $40 billion to $50 billion in agriculture.”
“This is a big opportunity for our farmers. I think some people have questioned whether they can produce it. However, the President said they are going to go out and buy more land and produce plenty of [products],” he said. Describing it as a “historic transaction”, Mr. Mnuchin said further talks would be held for the remaining phases.
“As we have said, there will be a Phase Two. But this is the first time we have had a comprehensive agreement with China on technology issues, agricultural issues, financial services, purchases and a real enforcement mechanism. So this is a big win for the President,” he said.
Enforcement provisions
Mr. Mnuchin said the first phase of the trade deal includes real enforcement provisions. “If they don’t comply with the agreement, the president retains the authority to put on tariffs, both existing and additional,” he said. The language of the trade deal, he said, will be released this week.
“The day of the signing, we will be releasing the English version,” he added. According to Mr. Mnuchin, there are very important intellectual property rules in the deal that the U.S. expects the Chinese to adhere to. “There are cyber concerns that we do have. So, let me just be clear. Cyber will be part of Phase Two,” the Secratary said.
“But we have incorporated provisions in Phase One that we think are important protections for U.S. companies. So, we have made very clear there can be no forced technology transfer and that China is putting out laws to protect both U.S. technology and other technology,” he added.
Mr. Trump, who has been accusing China of indulging in unfair trade practices, contributing to the huge trade deficit amounting to $375 billion, had earlier warned that if a deal is not reached by March 1, the end of the 90-day grace period, the U.S. will increase the tariffs on the $200 billions of goods from 10% to 25%.
IPR issues with China
The U.S. President has been demanding China to drastically reduce the trade deficit and ensure Intellectual property rights production for U.S. technologies and services. The escalating trade war raised concerns in China as its economy was on the downward trend amid efforts by the government to rejig the export-dependent economy to that of relying more on domestic consumption.
Last year, the U.S. imposed tariff hikes of up to 25% on $250 billion of Chinese goods. The move prompted China to increase tariffs on USD 110 billion of U.S. goods.
China is currently America’s largest goods trading partner with $635.4 billion in total (two way) goods trade during 2017. Goods exports totalled $129.9 billion; goods import totalled $505.5 billion. The U.S. goods trade deficit with China was a whopping $375.6 billion in 2017.
Trade in services with China (exports and imports) totalled an estimated $75 billion in 2017. Services exports were $57.6 billion; services imports were $17.4 billion. The U.S. services trade surplus with China was $40.2 billion in 2017.
