IN THE BILATERAL TRADE WAR The US and China are announcing progress, despite high tensions

A.T. (Translated by Cosmin Ghidoveanu)
English Section / 26 august 2020

The US and China are announcing progress, despite high tensions

Talks between the United States and China, though they only took place over the phone, have brought the world's two superpowers into the spotlight. Despite growing tensions over the past two years between the world's two largest economies, both in terms of data security and technology, and because of democracy in Hong Kong, senior US and Chinese officials spoke on Monday. They said that progress had been made in resolving the issues concerning Phase 1 of the bilateral trade agreement concluded in January, according to information from both governments, quoted by the Associated Press.

According to the US Bureau of Trade Policy (USTR), in the telephone conversation which represents a half-yearly review, the US and China have shown their willingness to cooperate and reaffirmed their commitment to make the Phase 1 trade agreement a success.

The two countries discussed the steps China has taken, including ensuring greater protection for intellectual property rights and removing impediments for US companies in financial services and agriculture, the US trade representative said. Both sides agreed to create conditions for the agreement to progress, according to the Chinese Ministry of Commerce.

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese deputy PM Liu He.

"Both parties are seeing progress and have made a commitment to take the necessary measures to ensure the success of the agreement", the communique of the USTR says, according to Reuters.

For its part, the Chinese Ministry of Commerce confirmed in a statement that the two countries have a "constructive dialogue" and agreed to continue efforts to implement Phase 1 of the trade agreement, which will end the trade war between the two countries that has disrupted the entire world economy.

"The parties have also discussed the significant increases of purchases of American products by China, as well as the future actions needed for the implementation of the agreement", Reuters reports.

The Chinese purchases of American goods are way below the pace needed to reach the increase of 77 billion dollars for the first year, specified in the agreement, according to official data, China has increased the rhythm of the acquisitions of agricultural products in the last few weeks, according to Bloomberg.

The resolution of the trade war between the US and China have appeared as a rare area of cooperation, because the relationship spans multiple fronts. Nevertheless, Beijing is lagging seriously in the parts where it has commitments to fulfill regarding its purchases of agricultural products, energy and manufactured products made in the US.

According to Bloomberg, China ought to make purchases of approximately 130 billion dollars in the second half of 2020, in order to comply with the initial requirements of the deal signed in January, when it agreed to buy American goods and services amounting to an additional 200 billion dollars compared to 2017, by the end of 2021.

"The statement at least tells us that Trump's administration still treasures the trade deal," said Raymond Yeung, greater China chief economist with Australia & New Zealand Banking Group Ltd. "China's buying of U.S. agricultural and energy products is still an attractive proposition before the presidential election. This suggests that we are not really seeing a full decoupling of the two economies."

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese Vice Premier Liu He Monday evening Washington time, according to the U.S. statement. The USTR later corrected that statement as they misspelled Liu's first name, a mistake that drew attention on Chinese social media.

"The parties have also discussed about the significant increases of the acquisitions of American products by China, as well as about the future actions needed for the implementation of the agreement", the US says in the official statement. Both parties have also discussed improving their coordination when it comes to macropolitics. The call was held on the evening of the first day of the National Republican Convention, which is when some of the speakers have criticized the alleged friendship with China of US Democratic Party presidential candidate, Joe Biden. President Donald Trump has marked his official nomination for a second term with a speech that China will "own" the US if Biden wins the November elections.

The talks between the two countries were expected to take place two weeks ago, on August 15, following a six-month review since the deal, which was signed in January, came into effect on February 15th, but president Donald Trump, who frequently expressed his displeasure at China due to the new coronavirus pandemic, has stated last week that he has postponed the talks with China, stating: "I don't want to deal with them right now".

Prior to the talks, Bloomberg News reported that the Chinese state would raise the issue of Washington's recurring crisis over businesses, including TikTok and WeChat. The subject was not mentioned in the statements of the two countries. On Monday, TikTok asked a federal judge to block the Trump administration from promoting the ban on its application.

According to Bloomberg, China has made progress on its commitments. The Chinese state has amended regulations to allow the import of a variety of US agricultural and food products, while eliminating foreign capital caps on insurance, securities and futures contracts. It has also lowered other financial market barriers and given the green light to companies such as American Express Co., MasterCard Inc. and Fitch Ratings Inc. to enter its market. US oil exports to China will reach a record next month, when about 19 containers of fuel will be delivered to the Asian market, according to transport devices, which may change. If all of them sail, exports could total 37 million barrels, the biggest monthly volume ever.

China's customs have also strengthened the crackdown on counterfeit goods and released quarterly reports, as set out in the agreement. The Supreme Court issued a series of work guidelines and implementation plans on ensuring and improving the legal enforcement of intellectual property infringements, while the National Intellectual Property Administration also published a work plan to strengthen IP protection in 2020 and 2021.

Trump used a more conciliatory tone than he did in early May, when he threatened in a Fox News interview that "if China doesn't buy, we will end the deal, very simple." In recent days, he has expressed more satisfaction with Beijing's compliance with the trade agreement, even if it is not about China's handling of the coronavirus crisis.

Amid the progress recorded by the two superpowers, the yuan has risen, as did the European stocks and the Dow Index.

In January, the two countries have reached an agreement concerning trade in the first stage, which required the increase of purchases of Chinese goods from the US and a greater access to the Chinese financial markets.

Tensions between the world's two largest economies have intensified over the past two years, with a focus on trade and spilling into the technology and finance sectors. The Trump administration has levied billions in taxes on Chinese goods worth billions of dollars, to which Beijing responded with similar measures.

In January, the two countries reached a first-stage trade agreement, which called for increased Chinese purchases of US goods and greater access to the Chinese financial market.

Nevertheless, bilateral tensions have continued to increase since then, due to the coronavirus pandemic and prior to Trump's bid for reelection in November.

Phase 1 of the trade agreement, signed on January 15th, maintains some of the tariffs that the two economies have levied on each other and for the first time will punish Beijing if it fails to honor its commitments concerning its currency (the yuan), intellectual property and trade balance.

The deal also relaxes some taxes imposed by the US on the Chinese imports and determines Beijing to buy more American products.

The deal eases some US taxes on Chinese imports and causes Beijing to buy more US products.

The signing of the document came after more than a year of negotiations, billions of dollars in customs duties imposed on each other by the two major economies of the world, respectively moments of escalation of the dispute between them.

The first phase of the deal between the US and China has been established in December 2019 and, according to specialists, will relieve the trade tensions between the two countries. This phase does not represent a complete trade agreement, which would reform the bilateral relation, which the Trump administration had in mind when it launched the trade war with China.

Donald Trump thinks that this agreement represents a win, even though the US administration has not yet obtained structural changes in China's economy, including the resolution of some aspects such as the huge subsidies granted by Beijing to Chinese companies.

Marc Busch, international business diplomacy professor at Georgetown university, said, quoted by "I wouldn't call that deal as a trade agreement. It is more of a ceasefire, which is supplemented by a certain barter".

Some experts are skeptical that the second Stage will be significant in resolving the US-China trade dispute.

The representative of the two world powers have concluded years of intense bilateral negotiations, with a deal that promises billions of dollars in agricultural products purchases and the beginning of reforms for China's long-standing practice of forced technology transfer.

On paper, the deal signed on January 15 included a "dramatic expansion of American exports of food, agricultural and seafood products", as well as China's agreement to end its long-time practice to force or pressure foreign companies to transfer their technologies to Chinese companies, according to a document by the US trade representative (USTR), CNBS reports.

The "phase one" deal which Trump called at the time "a big beautiful monster" is not a standard deal agreement: at 86 pages, it is thinner than most in terms of commitments. The US has agreed to cut to half 15% of the duties on the imports amounting to 120 billion dollars.

The document also states that the deal reiterates the American opposition to currency manipulation and a commitment by China to buy at least 200 billion dollars of the US exports over the course of two years, including manufactured, food and agricultural products, energy products and services.

The White House estimates that Beijing will buy approximately USD 80 billion worth of manufactured products, 53 billion dollars in energy, 32 billion dollars from agriculture and 35 billion dollars in services.

The question was raised immediately after the signing of the agreement was if the pact will succeed in rebuilding the relationship between the biggest economies of the world. To many in Washington, the economic ties between the US and China have become an example of SUA-China of the ills of globalization, the tensions of technology and geopolitics in the 21st century and of the missteps by previous presidents.

The first phase of the trade agreement envisages increasing Chinese purchases of US agricultural products by about $ 32 billion over the next two years, respectively by about $ 16 billion a year.

Combined with US agricultural exports of 24 billion dollars in 2017, it results in a total of 40 billion dollars per year, an objective announced by President Donald Trump.

US $ 80 billion in manufactured goods include automobiles and components, aircraft, agricultural equipment, medical devices and semiconductors.

Among the most popular vehicles manufactured in the US and sold on the Chinese market are BMW and Mercedes-Benz SUVs.

China also has major industrial targets to dominate the manufacturing sectors in which it has pledged to increase purchases of American goods, fueling even more skepticism.

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