The world’s two largest economies signed a trade agreement a year ago that was seen as an open challenge by the United States to the unfair trade practices of the Chinese Communist Party. The agreement has somewhat transformed bilateral trade relations, while the Chinese Communist Party’s commitment to significant purchases remains far behind.
The United States and the Chinese Communist Party signed the first phase of the trade agreement in Washington on Jan. 15, 2020, calling a halt to a growing trade war. Under the agreement, Washington agreed to partially cut increased tariffs in exchange for a $200 billion increase in China’s purchases of U.S. goods and services over two years from 2017 trade levels. The agreement also calls for the Chinese Communist Party to reduce trade barriers.
A year after the agreement was reached, there are mixed views on whether it was successful. What is certain is that the Chinese Communist Party has not met its expected procurement targets and that the U.S. trade deficit with China has only increased.
Some analysts argue that, on the positive side, the Trump administration has changed the perception of the CCP in the economic sphere, causing companies to reconsider their reliance on the Chinese supply chain.
Purchases fall short of targets
Under the deal brokered by the Trump administration, the Chinese Communist Party agreed to buy about $159 billion in U.S. goods by the end of last year. But the Peterson Institute for National Economics reported that the CCP’s actual purchases were about $82 billion as of last November, about 52 percent of the target.
China has been better at increasing its agricultural imports relative to its imports of manufacturing and energy products
. According to the report, China met 67 percent of its target for agricultural products, 52 percent for manufacturing and only 31 percent for energy.
Asked about Beijing’s implementation of the agreement, Li Kuiwen, a spokesman for China’s General Administration of Customs, said Thursday, citing data that showed China’s imports of U.S. products grew, particularly soybeans, pork and cotton.
Some economists attribute the shortfall in part to a Communist Party virus, with the outbreak weakening China’s domestic demand for foreign goods and lowering the price of imported energy products.
David Dollar, an expert on China’s economy at the Brookings Institution, a think tank, has argued from the outset that the Communist Party will not be able to meet its procurement targets.
He told Voice of America, “The core of the first phase of the agreement was that the Chinese Communist Party agreed to import more products from the U.S. This government-to-government agreement is not how trade works, and it turned out to be a failure.”
In addition, many U.S. businesses have criticized the Trump administration’s tariff hikes on China for increasing their costs, leading to job losses and higher product prices, hurting American workers and consumers. About $37 billion in Chinese goods are still subject to tariffs each year, affecting most imports.
The U.S. has lost 245,000 jobs due to tariffs imposed by the U.S. on China and retaliatory tariffs by the Chinese Communist Party, in part because of rising costs for U.S. companies that import parts and other products from China, according to the National Committee on U.S.-China Trade.
Despite U.S. efforts to curb the imbalance, China’s role in global trade has only grown. China’s trade surplus with the rest of the world grew to $535 billion last year, a record high since 2015, driven by strong exports of medical supplies, Beijing said Thursday.
Structural issues
In addition to buying U.S. goods, the first phase of the trade deal seeks to address long-standing structural barriers to U.S. companies operating in China by protecting intellectual property rights, avoiding forced technology transfers, and easing market access. In this regard, Beijing has made some progress.
Last June, China announced the opening of its $45 trillion financial market to foreign investors, and the central bank granted American Express its first license to conduct clearing operations in China; in September, China’s market regulator released a draft for greater protection of trade secrets.
However, the deal did not materially change the landscape for foreign companies that were banking on major structural changes in China’s domestic business environment.
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