By Ram Upendra Das
Few developments in recent years have seen quite the kind of worldwide ripples that the trade war between US and China have generated. Therefore the path towards a conciliation is bound to be watched very closely.
On December 13, the world was told about a phase one trade deal between the US and China. In its press release that day, the office of the United States Trade Representative announced: “The United States and China have reached a historic and enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.” It quoted United States Trade Representative Robert Lighthizer: “President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the US-China trade relationship.”
In terms of the specifics, the USTR fact sheet highlights several dimensions of the trade agreement.
The US will be maintaining 25% tariffs on approximately $250 billion of Chinese imports, but on some $120 billion of imports, the tariff will be cut by half — from 15% to 7.5%, according to Reuters. Part of the deal are commitments from China to import from the US over the next two years in a total amount that exceeds China’s annual level of imports for those goods and services in 2017 by no less than $200 billion. It focuses on US-manufactured goods, food, agricultural and seafood products, energy products and services.
While the Intellectual Property (IP) chapter covers trade secrets, pharmaceutical-related intellectual property, geographical indications, trademarks and enforcement against pirated and counterfeit goods, it is the Technology Transfer chapter that discusses a crucial commitment from China that the US has been able to extract: “For the first time in any trade agreement, China has agreed to end its long-standing practice of forcing or pressuring foreign companies to transfer their technology to Chinese companies as a condition for obtaining market access, administrative approvals, or receiving advantages from the government.”
In agriculture, exports-employment linkages are sought to be ensured by expansion of US food, agriculture and seafood product exports, by also tackling non-tariff barriers.
Barriers including foreign equity limitations and discriminatory regulatory requirements acting against US providers are addressed in Financial Services chapter in the realms of banking, insurance, securities, and credit rating services, among others.
The Dispute Resolution chapter sets forth an arrangement to ensure the effective implementation of the agreement and to allow the parties to resolve disputes in a fair and expeditious manner.
While more details are awaited, the broad insights that emerge from the US-China Phase One Trade Agreement are important for the overall global discourse on Trade and economic integration.
First, not only in today’s world but also in future the merits of global interdependence of economies for the welfare of domestic constituencies including workers and corporations need to be understood and acted upon. Exports contribute to domestic economic activity and help domestic job-creation and income growth, provided effective market access by addressing tariff and non-tariff barriers is ensured. Secondly, domestic economic concerns emanating due to external trade and economic variables need to be addressed by engaging on those external variables as well. Thirdly, to address such domestic economic concerns, continued engagements highlight the significance of perseverance in negotiations. Any negotiating outcome is a win-win only when both sides yield for both sides’ gains, without sacrificing their larger domestic economic imperatives Fourthly, to define the contours of terms and conditions and to make the negotiations really structured, and to implement the outcomes, a Trade Agreement becomes necessary. Fifthly, the importance of trade agreement becomes even more pronounced if it includes as an integral part a dispute settlement mechanism to address any domestic concerns that may arise. Sixthly, a trade agreement can be built over time, in a staggered manner, with periodic reviews.
No trade agreement can be frozen in time. No trade agreement at a given point of time can predict the future and incorporate provisions to tackle the unknowns. It needs to evolve through reviews in a dynamic setting as new issues unfold; novel concepts emerge and; neoteric challenges surface.
The world will watch closely for how further progress unfolds on this particular deal.
(The author heads Centre for Regional Trade)
Source: Economic Times