Beijing to Buy Additional $200 Billion in US Goods as Part of Initial Trade Deal

December 13, 2019 Updated: December 15, 2019
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WASHINGTON— The Chinese regime has committed to buying an additional $200 billion in U.S. goods and services over the next two years in a “phase one” trade deal struck between the two countries, according to a senior White House official.

The deal also includes commitments by the regime to reform “critically important structural issues,” including in the areas of intellectual property, forced technology transfer, and currency and foreign exchange, the Office of the U.S. Trade Representative (USTR) said in a statement.

After weeks of negotiations to work out the details of the “phase one” trade agreement—initially announced in October—the United States and the Chinese regime said on Dec. 13 that they concluded their talks and were ready to sign the deal in early January.

In a series of tweets on Dec. 13, President Donald Trump said that both sides “agreed to a very large Phase One Deal.”

He wrote that Beijing has “agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more.”

Beijing has “committed to increase their purchases of manufactured goods, agricultural goods, energy products, and services by at least $200 billion over the course of the next two years,” the official told reporters on a conference call.

That means China will boost its imports from the United States by at least $100 billion, on average, in 2020 and 2021; U.S. farm products will account for roughly half of that increase.

“In the agriculture area, we’re looking at China making commitments to make purchases in each of the next two years of an average of $40 billion to $50 billion,” the official confirmed.

In 2018, U.S. goods and services exports to China were $179.3 billion, according to the USTR.

“The farmers are going to have to work a lot of overtime to produce that much,” Trump told reporters.

Beyond the two years, the official said, “there’s an expectation that this [the purchases] will continue going forward.”

China will import more U.S. wheat, corn, and rice after the deal, China’s vice agricultural minister said Dec. 13, without elaborating.

According to the USTR, the United States will keep 25 percent tariffs on nearly $250 billion of Chinese imports, along with 7.5 percent tariffs on approximately $120 billion of goods.

However, a new 15 percent levy on nearly $160 billion of Chinese goods, which was to take effect on Dec. 15, was canceled.

Trump told reporters after the announcement that he would use remaining U.S. tariffs as a bargaining tool for the “phase two” deal, negotiations for which will begin “immediately.”

Larry Kudlow, chief White House economic adviser, told reporters in a conference call that the deal marked a “very important first step in solving our trade relations imbalances with China,” adding that “it represents an opening of China.”

Both sides are aiming to sign the deal in January, according to U.S. Trade Representative Robert Lighthizer, one of the lead negotiators in talks with China. He told reporters after the announcement that the signing would be at the ministerial level and wouldn’t involve Trump and Chinese leader Xi Jinping.

He warned, however, it would still be wise to be skeptical of whether China would deliver on its promises. The United States won’t impose new tariffs as long as Beijing continues to act in good faith, he added.

Speaking in a late-night press conference in Beijing, Vice Commerce Minister Wang Shouwen confirmed the deal, saying that a consensus was reached on a wide range of issues, including intellectual property protection, technology transfer, purchase of agricultural products and expanding trade relations.

“The deal can help expand economic and trade cooperation between the two nations and effectively manage the trade disputes,” Wang said, according to a report by the South China Morning Post (SCMP).

As part of the agreement, Beijing confirmed that it wouldn’t impose tariffs on U.S. goods scheduled for Dec. 15 as retaliation.

“China hopes the U.S. will fulfill its commitment,” Liao Min, deputy director of the office of the Central Commission for Financial and Economic Affairs said, according to the SCMP report. “Removing tariffs is the core concern of China.”

‘State of the Art’ Protections

The official said the deal contained “state of the art” protections for critical structural issues, such as IP protections, and measures to halt forced property transfer.

The IP reforms covered in the deal include the areas of trade secrets, pharmaceutical-related IP patents, trademark protection, enforcement against pirated and counterfeit goods, as well as online infringement, he said.

In addition, the regime has committed to change civil and criminal procedures in its enforcement of IP, the official added.

He said the regime also has agreed to end its long-standing practice of requiring foreign companies to transfer technology to domestic firms as a condition of market access, known as forced technology transfer.

However, the official noted the deal doesn’t address major issues surrounding cyberhacking and Beijing’s data localization laws, which requires all firms to store its data within China’s borders. These issues are to be dealt with in the “phase two” agreement. The new partial trade deal with Beijing also doesn’t address Chinese subsidies, one of the top concerns of the Trump administration and the impetus for starting a trade war.

‘Strong Enforcement Mechanism’

Included in the deal is a “strong dispute resolution system that ensures prompt and effective implementation and enforcement,” Lighthizer said in a statement.

He said the dispute resolution system will prescribe time-frames for actions at three stages: starting from the working level, escalating all the way up to the ministerial level, that is, by Lighthizer and Chinese Vice Premier Liu He.

If no resolution is reached by the end of that process, then the complaining party can take proportionate responsive action, “potentially in the form of tariffs,” he said.

The enforcement mechanism applies to all chapters in the trade agreement.

Good for US Economy

Stephen Moore, an economist and former Trump campaign adviser, said that the deal would be good for the president ahead of the 2020 election and for the U.S. economy.

“I think it’s more of a truce than a deal,” he told The Epoch Times’ affilliate NTD. “I think it’s basically a kind of time out on this trade war. And I think that’s a good thing for Donald Trump and the U.S. economy right now.”

He noted that the trade war for the past three years has been “hanging over the head of the economy, like a big dark cloud.”

Hence, “employers and industry people in the United States are very happy with this news,” he added.

Moore also raised doubts about China’s commitment to sign the deal.

“I don’t want to get too irrationally exuberant here because I think it’s still not settled in my opinion, until you actually get the government in Beijing to really sign on the dotted line.”

The U.S. Chamber of Commerce (USCC) applauded the news, calling it a “welcome gift for American businesses and consumers.”

“With substantial tariff increases set to kick in just days before the holidays, relief from those tariffs and the higher costs they impose on consumer goods and services is a welcome gift for American businesses and consumers,” Myron Brilliant, executive vice president and head of international affairs of USCC, said in a statement.

“The reduction of tariffs imposed in September is also a good step. This agreement creates greater certainty for American businesses, after months of uncertainty, as they plan for the year ahead.”

The partial deal is a good step but there’s more work ahead, according to Stephen Ezell, vice president of global innovation policy at the Washington-based think tank Information Technology and Innovation Foundation.

“It is essential that we work toward a comprehensive longer-term resolution to the U.S.–China trade dispute, in which the United States works with China to address many of the innovation mercantilist practices such as excessive subsidization, support for state-owned enterprises, forced technology transfer, and intellectual property requirements,” Ezell said.

“These are the most fundamental issues in the U.S.–China trade and economic relationship and a resolution of trade dispute that does not effectively address these underlying issues will be incomplete,” he added.

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