U.S., China Still Looking to Sign Phase 1 Trade Agreement in November
© , Sandler, Travis & Rosenberg, P.A. Originally published in the [11/01/2019] issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.
U.S. officials said this week they are still hoping to sign the first phase of a trade agreement with China in November. In the meantime the two sides are continuing to negotiate on the provisions that will be included in the agreement.
President Trump announced in mid-October an agreement in principle under which the U.S. agreed to postpone a tariff increase on $250 billion worth of imports from China in return for Chinese concessions on agricultural purchases, intellectual property, financial services, currency, and other issues. Trump said he expected the process of getting the agreement down on paper to take up to five weeks and said it could be ready to be signed at the Asia-Pacific Economic Cooperation forum summit in Chile Nov. 16-17.
However, that meeting was canceled this week because of ongoing protests in Santiago. The White House responded that it still wants to sign the agreement with China “within the same time frame” and President Trump said he and President Xi Jinping still plan to do the signing.
In the meantime, the two sides are still hammering out the details of the agreement, with lead negotiators expected to talk by phone Nov. 1. Both the U.S. and China said this week that negotiations have been productive, but several issues reportedly remain open.
One is China’s reputed pledge to purchase $40-50 billion worth of U.S. agricultural products, which would be double the amount it bought before trade tensions escalated in 2018. A Reuters article states that China wants the flexibility to make such purchases “based on market conditions instead of committing to a large figure and a specific time frame.” For example, the article said, Beijing could remove the 25 percent retaliatory tariffs it imposed on U.S. agricultural products in 2018 to make it more feasible for Chinese importers to buy more such goods.
There is also uncertainty as to the prospects for the second phase of an agreement, which is generally expected to cover some of the more problematic issues that underlie the bilateral trade war. While President Trump said previously that phase two negotiations would begin “almost immediately after we’ve concluded phase one,” press reports say each side is already staking out positions that the other could have difficulty accepting. A Bloomberg article explains that China wants the U.S. to “withdraw tariffs in place on some $360 billion in imports from China,” whereas the U.S. has expressed an interest in maintaining those tariffs as leverage in persuading China to keep its commitments. On the other hand, the U.S. is pushing for “deep structural reforms” in China’s economy that leaders there have staunchly resisted.