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What's In The Phase One US-China Trade Agreement?


12/15/2019


What's In The Phase One US-China Trade Agreement?
Even though the United States and China announced the phase one trade deal, neither of the countries provided much details of what exactly would be covered in the deal.
 
While acknowledging that both the countries still have a lot of big issues to sort out in terms of the overall trade deal in the future negotiations, US Trade Representative Robert Lighthizer said that the phase one trade deal was an important step forward for the two yow largest economies of the world.
 
Here’s what is majorly covered in the phase one trade deal:

Tariffs

According to the deal, the tariffs on about $120 billion in Chinese goods will be reduced by half to 15 per cent and will also suspend indefinitely the announced tariff that was to take effect on December 15 which would have covered a host of consumer products such as smart phones and laptops. This will result in about $250 billion of Chinese goods being imposed tariffs of 25 pert cent and about $120 billion that will be subject to a 7.5 per cent tariff after the signing of the phase one deal.
 
Lighthizer said that reduction and roll back of the remaining tariffs will be conditional on the conclusion of future trade agreement phases.
 
On the other hand, no specific reduction in tariffs was agreed to by China. Rather Beijing agreed to increase purchase of US farm products and to implement an exclusion policy to its tariff regimen for American products. Some retaliatory tariffs have been reduced in recent months on a host of American products such as cars.
 
Purchases
 
This part of the deal was referred to as the Expanding Trade chapter in a USTR fact sheet. Under this clause, the total purchase of US goods and services by China would be increased by at least $200 billion during the next two years, according to the US. This clause also includes a pledge by China of increasing its purchase of American agri products by about $40 billion to 50 billion in each of the next two years. “These are numbers that are realistic and that we arrived at together," Lighthizer told reporters. The US will not disclose the details of the individual commodities that would be purchased by China to avoid market distortion.
 
IP, Forced Tech Transfer
 
“State-of-the-art" IP commitments and a breakthrough on forced technology transfer, as described by a senior administration official, was the focus of the deal.
 
The specific commitments from China as announced by the USTR include China agreeing to bring to an end a long standing trade practice under which foreign companies had to transfer their technology to local Chinese partner as a precondition for such foreign companies gaining access to the Chinese market, approvals from the government agencies or for getting advantages form the central and state governments of China.
 
Further, this will also gains commitment from China about providing transparency, fairness, and due process in administrative proceedings and allow transfer of technology and licensing only on market terms.
 
Enforcement
 
The enforcement of the elements of the trade deal will be done through a dispute-resolution mechanism. That is similar to how the US ensures enforcement of its trade agreements. A US-China working group will hear complaints of one party and such complaints will then addressed by at the ministerial level about what action to take, it there is no redress at the working group level.
 
(Source:www.livemint.com)