US President Donald Trump signed Wednesday a partial, Phase I deal with China which, he said before the signing, was a “momentous step” towards a future of fair and reciprocal trade between the two countries. Signed by Vice-Premier Liu He for the Chinese, the deal will put on pause a two-year-long trade war between the world’s two largest economies that had shaken up the global economy.
The agreement includes a “major commitment” by China to make “significant reforms” in a wide range of critical areas and to make substantial additional purchases of American goods and services in the coming years, the White House said in a note backgrounding the agreement. This agreement is strengthened by a “strong dispute resolution system that ensures prompt and effective implementation and enforcement” of the deal.
“Today we take a momentous step one that has never been taken before with China as we sign phase one of the trade deal,” Trump said, announcing the conclusion of the agreement at a White House event attended by lawmakers, officials and supporters and the former secretary of state Henry Kissinger, who had spearheaded President Richard Nixon’s outreach to and the 1972 visit to China that led to the thaw in relations between the two countries.
Vice-Premier Liu read out a message from President Xi Jinping in which the latter stressed the need for equality and mutual respect in tackling issues and implement the deal in “real earnestness”. Xi also said he hoped that US treats Chinese companies fairly.
China will buy $200 billion worth of US farm produce and other goods under the terms of the agreement that runs into 86 pages. It will also liberalize its financial services sector to grant access to American companies, end forced transfer of technology through acquisitions, end currency manipulation, work towards balancing trade between the two countries and also punish it companies found to have stolen proprietary intellectual property and patented technology.
In return, the United States will halve tariffs on $120 billion of goods from China, and shelve for now further levies. But import duties on $360 billion of Chinese goods will remain in force, to make sure, according to news reports citing unidentified US officials, China delivered on its commitments.
“These tariffs will stay in place until there’s a phase two. If the president gets a phase two quickly, he’ll consider releasing tariffs as part of phase two,” Treasury Secretary Steven told reporters. “If not, there won’t be any tariff relief. So it has nothing to do with the election or anything else. There’s no secret agreements.”
On Monday, the United States dropped its designation of China as a currency manipulator, which it had announced last August. Beijing has given “enforceable commitments to refrain from competitive devaluation”, Mnuchin had said in a statement This is going to be a part of the deal to be announced Wednesday.
Critics of the president however called the deal “weak” and accuses the administration of giving up prematurely. “Based on the reports we’ve seen so far, the commitments China is making, including on forced technology transfer, currency manipulation, and intellectual property protection, are almost all vague, weak, or covered by previous announcements and existing agreements,” said former Vice-President Joe Biden, who is seeking the Democratic presidential nomination to take on Trump in November.
Indian trade negotiators will be watching the signing closely and will study the agreement carefully as they wrap up their own trade talks with American negotiators — for a short-term trade deal with a longer-term version left for later — with an eye on a late-February visit to India by President Trump.
Trump, who had campaigned on the promise of ending China’s unfair trade practices, which he said Wednesday was his key motivating factor, set the ball rolling in April 2017 with an announcement of a 100-day plan to fix trade deficit after a meeting with China’s Xi Jinping at his Mar-a-Lago. The deadline passed without an agreement.
It was downhill thereafter. Over the following months the two countries slapped tariffs on each other with China tactically targeting Trump’s supporters in the midwest, the soybean farmers. It hurt, and Trump complained about Chinese interference in domestic politics. But he kept dialing up the pressure, putting almost all of the half-trillion worth of imports from China under stiff tariffs.
The two sides also talked, but fittingly. One time late 2019, they came close to announcing a deal and then the Chinese backed out of key commitments that left the American, including the president, seething with anger. They accused Chine was reneging, and more tariffs followed.
They have had better luck this time. So far. There is a deal in place, but closely guarded apart from the details officials chose to release. Top negotiators from the two sides had dinner together Tuesday night, according to a news report. A few hours later, they will go out and make history.