The dependence of the Phase One deal on massive purchase commitments from China could be its biggest mistake. These commitments often generate press releases about the big sales that are coming, but the deal has not done enough for what was really needed: lower tariffs and other trade barriers to allow producers to compete with the Chinese market. If trade liberalization had been at the centre of the agreement and not just the small part that was, the long-term results might have been better. The U.S. and China need to renegotiate important policies that are not affected by the Phase One agreement. Trump`s trade war has failed to address what was really shaking the U.S.-China trade relationship. It is time for a new approach. While signatories celebrate it as “historic” – hyperbolic for its modest goals – what the deal hopes to be is opposable. Its provisions implement, inter alia, tariff reductions, the expansion of commercial purchases and renewed commitments on intellectual property rights (IP), technology transfer and monetary practices. Details of the basic approach to mapping the 2020 annual targets on trade data are available in Bown (2020). Additional assumptions made here include estimating for 15 distinct product categories, as the agreement contains only aggregate targets for the four manufacturing, agriculture, energy and services sectors. The approach is to allocate targets at the product level based on the share of that product in overall U.S.
exports to China in 2017 of the goods covered by the purchase obligations. See also the table below. From the beginning, an additional $200 billion in additional sales to China was a worrying target. Nearly 30 percent of U.S. exports to China are not even covered by the Phase One agreement. And for those who covered the deal, a review of 15 product groups shows that their sales to China have been influenced by a number of factors, including plane crashes, outbreaks, export controls, World Trade Organization (WTO) court rulings, the persistent impact of trade war tariffs, and the pandemic. Today, the world`s two most powerful economies have begun to re-establish a positive, mutually beneficial trading relationship. On January 15, 2020, the United States and China signed the long-awaited Phase One Economic and Trade Agreement in Washington DC. The Office of the United States Trade Representative (USTR) and the Chinese Ministry of Commerce (MOFCOM) then released the full text of the agreement in English and Chinese.
This first trade deal is seen as the first sign of de-escalation in the long trade war between the United States and China. For more than 18 months, the world`s two largest economies have faced crises followed by back-and-forth negotiations week after week, not to mention a customs war for action, the introduction of foreign technology restrictions and business under negotiation at the WTO. Such a large increase in its U.S. imports will mean that China will reduce imports from other countries in order to balance the country`s overall trade balance. The United States and China have reached a historic and enforceable agreement on a phase one 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, and currency and currency. . . .