Here’s What’s in the Phase One Deal with China

It appears phase one is a done deal.

Vice Premier Liu He will soon visit Washington D.C. to sign after the two sides said on Dec. 13, 2019 they had reached an agreement where China will substantially increase its purchases of U.S. agricultural products, pledge not to devalue its currency, and help to better protect U.S. intellectual property.

In return, the Trump Administration canceled new tariffs on $156 billion worth of Chinese imports that were set to take effect Dec. 15.  The President also agreed to cut in half the current 15% tariffs on nearly $120 billion worth of Chinese goods.

Here’s what’s in the deal, according to a U.S. Trade Representative document.

The deal includes a “dramatic expansion of U.S. food, agriculture and seafood product exports” and an agreement by China “to provide transparency, fairness, and due process in administrative proceedings and to have technology transfer and licensing take place on market terms.”

The USTR document also refers to currency manipulation.

“The chapter on Macroeconomic Policies and Exchange Rate Matters includes policy and transparency commitments related to currency issues. The chapter addresses unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting of exchange rates, while promoting transparency and providing mechanisms for accountability and enforcement.”

In addition, the document refers to a commitment for China to buy at least $200 billion worth of U.S. exports, including agricultural goods, energy products and services.

At the same time, according to the South China Morning Post, the U.S. has removed China from a list of currency manipulators.  “In this context, Treasury has determined that China should no longer be designated as a currency manipulator at this time,” the US Treasury Department said.

While phase one appears to be a done deal, phase two may take some time.

According to Jia Qingguo, one of Beijing’s top foreign policy experts, as noted by the South China Morning Post, “Despite the recent announcement that we are going to have the first phase agreement, [the] relationship between China and the US is still in deep trouble and is heading south rather than north. It is getting worse.”

All on concerns about “excessive” demands from the U.S., which have left Chinese officials feeling “useless” to engage, as also reported. 

He also noted it “very unreasonable” for the US to demand that China buy its products in huge quantities, even though Beijing has made “concessions” such as agreeing in December to buy $50 billion worth of agricultural goods.

Hopefully, such concerns can be ironed out as we move forward.

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