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US-China Phase 1 Trade Agreement May Set Rules for Commerce

Shanghai — A few days before the coronavirus closed Wuhan, China, changing the world, the Trump administration, and China signed What both sides said would be only a temporary ceasefire in the 18-month trade war.

Since then, the pandemic has confused global priorities, international commerce has once again stalled and surged, and President Biden has taken office. But the ceasefire will endure — and now it looks like we are setting new, lasting basic rules for world trade.

The agreement did not stop many of the same practices that caused the greatest trade war in history. While it doesn’t prevent China from spending huge amounts of money on a variety of industries that could shape the future, from electric cars to jet liners to computer chips, China often relies heavily on American technology. I will.

In return, the ceasefire enshrined most of the tariffs the Trump administration imposed $ 360 billion annually on goods made in China, many of which were subsidized. Such a one-sided move goes against the spirit of the rules of world trade established to prevent countries from initiating economic conflicts on their own and to prevent nations from running out of control.

But the new model seems to be catching up. The European Union announced on May 5 that it is drafting a bill to make it possible. Widely penalize imports and investments From overseas subsidized industries.at first I saw a US-China ceasefireSaid that their policy was not specifically targeted at China. However, trade experts quickly realized that no other exporter had the manufacturing scale and subsidy range that China has.

“There is a real desire for unilateral measures not only in the United States but also in the EU,” said Timothy Meyer, a former State Department lawyer who is now a professor at Vanderbilt University Law School.

The ceasefire, known as the Phase 1 agreement, could still be replaced by the New Deal. The agreement requires both sides to carry out a high-level review of it this summer. In Washington on Wednesday, US Trade Representative Katherine Tai made an introductory call with senior Chinese official Liu He. This was held in place by China by Liu He, the same supreme negotiator who confronted the Trump administration.

However, the outlook for the widespread New Deal this year is weak. The Biden administration is developing a comprehensive strategy for China. This is a complex inter-ministerial procedure that may continue until early next year. He also showed little willingness to ease China’s trade practices and publicly discussed facilitating relations with Europe and other allies involved in other conflicts under the Trump administration.

“We welcome the competition,” says Thailand. I told a member of the Diet Early this month. “But competition must be fair, and if China cannot or does not adapt to international rules and norms, we will level the competition and strengthen our own capabilities and partnerships. Must be bold and creative in taking steps. “

On the Chinese side, Beijing would not criticize the issue of subsidies, said people familiar with the two countries’ positions insisted on anonymity because they did not have the authority to publicly discuss the issue. They said China hasn’t even proposed to revise the agreement, apart from many demands that the United States simply waive tariffs, because Chinese authorities don’t want to discuss subsidy limits.

If that uncompromising continues, Phase 1 may continue to set trade rules for the next few years.

Some provisions will expire at the end of the year, but the agreement includes permanent requirements such as stopping foreign companies from forcing foreign companies to transfer technology to Chinese companies as a condition for China to do business there. I am. The ambiguous clause also requires China to purchase an increasing amount of American goods by 2025.

This could set the stage for more targeted negotiations, such as whether China has achieved the agreement’s annual purchase target. Both sides may also discuss the solar industry that caused the previous trade spats among them, but may take a new look as the Biden administration emphasizes climate change.

On the surface, Phase 1 trade agreements are below the Trump administration’s goals. The administration hoped that the negotiations would level out the huge trade imbalance between the two countries and curb China’s subsidies. It sees US companies and authorities creating huge, state-funded competitors to US industry.

Instead, the US trade deficit with China increased by nearly half again in the first three months of the year to $ 78.6 billion compared to the previous year. Supported by the purchase of a pandemic Mainly like home appliances, exercise equipment and other products made in China.

However, China’s imports from the United States have been catching up since bad weather, Fatal pig disease Sharpened China’s appetite for American food. Weiwen, a former Commerce Department employee who is currently the secretary-general of the China International Trade Association in Beijing, said China has made sincere efforts to fulfill its promises.

“China has not violated that Phase 1 agreement,” he said.

In the long run, Phase 1 transactions could reinforce America’s approach to using tariffs to offset China’s willingness to remodel and upgrade China’s economy through luxury subsidies.

During the trade war, the Trump administration sought to persuade China to abandon subsidies to exporters. This includes cheap land for factories and huge loans to manufacturers at below-market interest rates. The Biden administration is also planning large-scale subsidies, but they are primarily for research and development and are a category of subsidies that rarely violate international trade rules.

Some Chinese economists have also tried unsuccessfully for years to argue that the country’s industrial policy is too high and is increasing its debt burden.

However, instead of accepting subsidy restrictions, Beijing reluctantly tolerated US tariffs and stood up resolutely. In the next year and a half, China has doubled its subsidies in many areas.It is a country top leader of Xi Jinping is Strong support for Chinese drive To achieve industrial independence.

Even if they come up with a serious offer to trade China’s subsidy cuts for US tariff cuts, they will still need to confront China’s strong domestic members. Those familiar with China’s economic policy said that most government ministries now seem determined to use whatever it takes to turn the country into a tech powerhouse.

In an annual report to Parliament in March, Prime Minister Li Keqiang showed that China has already promised to significantly strengthen the world’s largest manufacturing industry. “In pursuit of economic growth, we prioritize the development of the real economy, upgrade the industrial base, modernize the industrial chain and fundamentally stabilize the manufacturing share of the economy,” he says. I did.

Chinese officials look more open to talking narrowly about solar energy. Such transactions may include raising Chinese tariffs on US polysilicon, the main raw material for solar panels, in exchange for removing US tariffs on Chinese panels. It will make solar energy cheaper in the United States and help Americans reduce their reliance on coal and other fuels that contribute to climate change.

Exports of US polysilicon produced primarily from hydroelectric dams in the northwestern Pacific will also reduce reliance on coal-fired polysilicon production in western China’s Xinjiang Uighur Autonomous Region. Recent reports The Chinese government claimed to have worked with a major Chinese solar power company to create jobs in a program that explained that activists were prone to human rights abuses.

The Chinese government has denied the abuse.

But the deal would be worrisome to Congress and others elsewhere, arguing that the West needs to strengthen its industrial base and pointing out China’s reliance on solar panels.

“Countries other than China,” said Seamus Grimes, an emeritus professor at the National University of Ireland studying China’s supply chain, “becoming more aware of how dependent China’s supply chain is. “.

US-China Phase 1 Trade Agreement May Set Rules for Commerce

Source link US-China Phase 1 Trade Agreement May Set Rules for Commerce

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