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U.S. and Mainland China Still Looking to Sign Phase 1 Trade Agreement in November

U.S. officials recently said they are still hoping to sign the first phase of a trade agreement with mainland 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 United States agreed to postpone a tariff increase on US$250 billion worth of imports from mainland China in return for mainland 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 on 16-17 November.

However, that meeting was cancelled last week because of on-going protests in Santiago. The White House responded that it still wants to sign the agreement with mainland 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. Both the United States and mainland China said last week that negotiations have been productive, but several issues reportedly remain open.

One is mainland China’s reputed pledge to purchase US$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 mainland 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 mainland 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 bi-lateral 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 mainland China wants the United States to “withdraw tariffs in place on some $360 billion in imports from China,” whereas the United States has expressed an interest in maintaining those tariffs as leverage in persuading mainland China to keep its commitments. On the other hand, the United States is pushing for “deep structural reforms” in mainland China’s economy that leaders there have staunchly resisted.

Content provided by Picture: HKTDC Research
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