A “Phase 1” trade deal was signed Wednesday by President Donald Trump and Chinese Vice Premier Liu He that reduces some tariffs between the countries and seeks to boost U.S. agri exports to China. Critics say the deal avoids the hard trade issues between the two countries.
Following are some of the items in the newly signed deal.
The U.S. will not pursue plans to impose tariffs on an additional $160 billion in Chinese imports and will reduce by half – down to 7.5% – tariffs on $110 billion of goods from China.
China agreed to buy $40 billion a year in U.S. farm products. The imports, if met, would surpass the less than $30 billion China imported prior to the start of the trade war. The agreement addresses structural barriers that have unfairly limited United States food and agricultural exports.
China agreed to end its practice of forcing foreign companies to transfer their technology to Chinese companies in order to gain market access. China has also agreed to address numerous longstanding intellectual property concerns in the areas of trade secrets, trademarks, enforcement against pirated and counterfeit goods, and more.
The agreement addresses a wide range of trade and investment barriers that have prevented American financial services companies from being able to compete in China.
The deal leaves in place tariffs on more than $350 billion in Chinese imports. Such tariffs are set to be discussed in Phase 2 of talks between the two countries. Secretary of the Treasury Steven Mnuchin and U.S. Trade Representative Robert Lighthizer said the second phase will not happen until after the November general elections.
“President Trump is making good on his promise to fix the failed policies of the past and deliver fairer trade for the United States,” noted the White House statement. “This historic agreement will begin to rebalance our vital trade partnership with China and benefit both of our countries. The signing of this agreement will be an incredible boost for American businesses, farmers, manufacturers, and innovators.”
Agriculture and manufacturing were the two biggest concerns for the Arkansas economy in terms of the negative impact of the trade war with China. Rich Hillman, president of the Arkansas Farm Bureau, said the deal is a good first step.
“Agriculture is vital to the Natural State, and Phase One marks a needed step in addressing important priorities. This action expands American agriculture sales to China, and we look forward to seeing a positive impact on Arkansas’s economy. We thank members of the Arkansas Congressional delegation for their focus on this matter. While this progress is welcome news, we urge continued negotiations and concentration on securing a comprehensive deal,” Hillman noted in a statement provided by the office of U.S. Rep. Steve Womack, R-Rogers.
Melvin Torres, director of Western Hemisphere trade at World Trade Center Arkansas in Rogers, said Arkansas export dollars of soybeans could increase by up to $223 million.
“When added, an approximate total annualized increase of up to $308 million in export dollars may be gained by Arkansas farmers and businesses with a new deal with China in all those trade industries by returning to previous levels and volumes. The amount in soybean exports include leveling and returning to more stable prices,” Torres said. “Soybean farmers stand to benefit the most, as it is the largest annualized export dollar amount to be gained from all goods and agricultural exports with a total of up to $223 million. This includes a weighted average from the past 3 years of published data which includes pre and post tariff export dollars.”
U.S. Sen. John Boozman, R-Ark., also said the deal is good news for Arkansas’ agri economy.
“Agriculture is Arkansas’s number one industry and our farmers and ranchers have been subjected to China’s unfair practices for too long. While work remains, China’s commitment to increase the amount of American farm products it purchases, along with the removal of specific barriers to entering the Chinese market, should be seen as welcome developments for our agriculture community,” the state’s senior senator said in a statement.
U.S. farmers were hit so hard by the loss of Chinese markets that the Trump Administration has authorized $28 billion in bailouts, far more than the $12 billion the U.S. Treasury ended up paying for the controversial auto bailouts between 2008-2010. As of Jan. 6, Arkansas farmers received $331.086 million in federal support, according to the U.S. Department of Agriculture. Of that, $783,506 was for livestock, and the remainder was for row crops. Iowa tops the list for farm bailouts with $1.188 billion.
“The Trump Administration has made it a priority to tackle China’s predatory behavior and address inequities that have disadvantaged the United States for years,” Womack noted in his statement. “Today’s signing is the result of concerted efforts to create a more level playing field for American agriculture producers and businesses, and it’s another important step forward. Phase One provides an enhanced trade framework that will increase market access and economic opportunity in Arkansas and across the nation. We must continue to advance talks and secure a complete and fully enforceable deal. This news, coupled with progress on other agreements like the USMCA, shows how strong negotiations are ushering in modernized policies that reflect the realities of 21st century trade.”
A report from NBC news cited two sources who raised concerns about Phase 1.
“The two sides have reached a deal simply by avoiding the difficult issues like intellectual property protection in China,” said Mark Williams, chief Asia economist at Capital Economics. “China has no desire to change the way its economy operates.”
Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, said in the NBC report that the agreement has a “big omission.”
“It doesn’t so far include anything that is related to the entire issues surrounding Huawei, 5G, export controls, or a host of new technologies. More importantly, there is nothing here concerning Chinese subsidies and I think that, in many ways, is the big omission. If you’re worried about China as a long-term tech competitor, then clearly the logic of that argument rests with the fact that the Chinese are quote-unquote rigging the system through state-owned subsidies,” Kirkegaard said. Link here for more details from the White House about the Phase 1 agreement.