The United States and China reached a trade deal Wednesday that eases tensions between the world’s two biggest economies, offers massive export opportunities for U.S. farms and factories, and promises to do more to protect American trade secrets.
Still, the Phase 1 agreement leaves unresolved Washington’s fundamental differences with Beijing, which is relying on massive government intervention in the economy to turn China into a technological power.
President Donald Trump is wanting to show progress on an issue that he has made a hallmark of his presidency and hopes to use in his reelection campaign this year. Wednesday’s signing ceremony at the White House gave him the chance to do that just hours before the House voted to send articles of impeachment to the Senate for a trial.
Trump promoted the trade signing as a way of delivering economic justice for American workers he claims have been betrayed by past administrations and their trade policies.
“We mark more than just an agreement. We mark a sea change in international trade,” Trump declared during a rambling ceremony in which he made references to former FBI Director James Comey, the impeachment proceedings and a possible visit to Mount Rushmore on July Fourth for a fireworks display.
The Chinese delegation also praised the pact. Chinese leader Xi Jinping said in a letter to Trump that the first-phase deal was “good for China, for the U.S. and for the whole world.” He said it also showed the two countries had the ability to “act on the basis of equality and mutual respect.” The letter was read by Beijing’s chief negotiator, Vice Premier Liu He.
Some of the president’s Democratic critics were unimpressed.
“True to form, Trump is getting precious little in return for the significant pain and uncertainty he has imposed on our economy, farmers, and workers,” said former Vice President Joe Biden, one of the Democrats hoping to replace Trump.
House Speaker Nancy Pelosi, D-Calif., said in a statement that “with the economy losing thousands of manufacturing jobs and Farm Country reeling from the damage caused by President Trump, Americans are left with nothing more than a showy television ceremony to try to hide the complete absence of concrete progress, transparency or accountability in this ‘phase one’ agreement.”
The administration acknowledges the agreement leaves unresolved some U.S. complaints — most notably, the way the Chinese government subsidizes its companies. That was the concern voiced when Trump sparked a trade war by imposing tariffs on Chinese imports in July 2018.
“The Phase 1 deal contains meaningful commitments but by no means lives up to the initial objectives of the administration,″ said Wendy Cutler, a former U.S. trade negotiator who is now vice president at the Asia Society Policy Institute. Further Chinese concessions would force Bejing to make major changes in its state-dominated economic model, which means ”the prospects for a timely conclusion are remote,″ she said.
The agreement leaves in place tariffs on about $360 billion in Chinese imports, leverage the administration hopes will generate future concessions.
U.S. Trade Representative Robert Lighthizer said work on follow-up negotiations will hinge on how China fulfills the commitments it made in the initial phase.
“We have to make sure this is implemented properly,” Lighthizer said. “This is the first agreement like this of its kind and we have to make sure that it works.”
The agreement is intended to ease some U.S. economic sanctions on China while Beijing is to step up purchases of American farm products and other goods. Trump cited beef, pork, poultry, seafood, rice and dairy products as examples.
U.S. trade officials said the agreement would end a long-standing practice of China pressuring foreign companies to transfer technology to Chinese companies as a condition for obtaining market access. Lighthizer said China has also agreed to combat patent theft and counterfeit products, which would include forfeiting machinery used for making counterfeit products.
The 86-page agreement makes it easier to bring criminal cases in China against those accused of stealing trade secrets. It includes provisions designed to stop Chinese government officials from using administrative and regulatory procedures to ferret out foreign companies’ trade secrets and allowing that information to get into the hands of Chinese competitors.
The deal requires China to come up with procedures to “permit effective and expeditious action’’ to take down websites that sell pirated goods. China also must make it possible for e-commerce sites to lose their licenses for “repeated failures to curb the sale of counterfeit or pirated goods.’’
China is required to increase its purchases of U.S. manufactured, energy and farm products and services by a combined $200 billion this year and next. The arrangement means that China is supposed to buy $40 billion in U.S. farm exports. That would be a windfall for Trump supporters in rural America but an ambitious goal considering that China has never bought more than $26 billion in U.S. agricultural products in a year.
“It’s a strong first step,” said Jeremie Waterman, the U.S. Chamber of Commerce’s vice president for Greater China. “It begins the process of addressing some of the structural concerns, but there’s a lot of work left to do. The meat, the core of (U.S. complaints about China’s aggressive tech policies) has not yet been addressed. Obviously, that’s going to have to wait until Phase 2.’’
Most analysts say any meaningful resolution of the main U.S. allegation — that Beijing uses predatory tactics in its drive to supplant America’s technological supremacy — could require years of contentious talks. Skeptics say a satisfactory resolution may be next to impossible given China’s ambitions to become the global leader in such advanced technologies as driverless cars and artificial intelligence.
The U.S. has dropped plans to impose tariffs on an additional $160 billion in Chinese imports, and it cut in half, to 7.5%, existing tariffs on $110 billion of good from China.
Derek Scissors, China specialist at the American Enterprise Institute, said the trade war has already delivered a benefit for Trump, even if it hasn’t forced Beijing to make major changes to its economic policy: Trump’s tariffs have reduced Chinese exports to the United States and narrowed America’s trade deficit with China.
So far this year, the U.S. deficit with China in the trade of goods has declined by 16%, or $62 billion, to $321 billion compared with a year earlier. The deficit will narrow further if Beijing lives up to its pledges to buy dramatically more American imports.