The first phase of the U.S.-China trade agreement signed a year ago has been praised for improving the business environment for some U.S. companies, although China is lagging in its commitment to significantly increase its purchases of goods from the United States. This commitment is a cornerstone of the agreement. China has performed better in increasing agricultural imports than in manufacturing and energy products in delivering on the first phase of the agreement’s procurement agreement. With Trump leaving office and Biden taking office on the 20th, concerns have been raised about the future of the first phase of the U.S.-China trade agreement.
According to the Wall Street Journal, the first anniversary of the U.S.-China trade deal saw China’s procurement commitments fall short of the mark. According to the agreement facilitated by the Trump (Donald Trump) administration, China agreed to buy about $159 billion of U.S. goods by the end of 2020. An analysis conducted by Chad Bown, a senior researcher at the Peterson Institute for International Economics, shows that China actually purchased about $82 billion in goods from the U.S. as of November 2020, accomplishing about 52 percent of that goal.
The first phase of the U.S.-China trade agreement signed on Jan. 15, 2020, also urged China to further open its markets to U.S. companies – something the Chinese government has made significant progress on, especially market access for U.S. financial firms, according to the report. In exchange, the Trump administration agreed in the deal to cut tariffs imposed on some Chinese products sent to the United States. However, about $370 billion in annual import tariffs are still imposed on Chinese exports to the U.S., meaning that most Chinese exports to the U.S. are affected.
The agreement, signed a year ago by the U.S. and China, is effectively a cease-fire after a tense trade war, known as the “first phase” of the agreement, which amounts to an acknowledgement that the agreement does not fully achieve President Donald Trump’s goal of creating a level playing field for U.S. businesses.
In addition to requiring China to increase its purchases of U.S. goods, the agreement also seeks to address structural barriers long criticized by U.S. businesses by protecting intellectual property rights, improving market access for U.S. financial services companies and avoiding forced technology transfers from foreign companies.
The drop in economic activity during the epidemic led to a 5.8 percent drop in U.S. imports of Chinese goods, pushing the U.S. trade deficit with China down 12 percent to $283 billion from January to November. But as U.S. imports have begun to rebound strongly in recent months, the trade deficit with China has risen again.
While Washington has struggled to contain the imbalance, China’s role in global trade has only grown in the last year. The Chinese government announced last Thursday that China’s exports rose 3.6 percent from a year earlier to a record $2.6 trillion in 2020, driven by strong exports of medical supplies and home office computer equipment.
China’s trade surplus with the rest of the world widened to $535.33 billion, the largest since 2015, due to a slight decline in imports.
In an interview with The Wall Street Journal last week, Leitheiser said, “The deal was a success. The direction has been set.” He also said that the Biden (Joe Biden) administration should keep the agreement intact. Leitheiser said, “Just use the tools, keep the current tariffs and the Chinese procurement commitments, and make sure China keeps its commitments.” President-elect Joe Biden and his aides have said they will maintain their tough stance on China, but have not yet discussed how to approach the first phase of the trade deal.
Bown, of the Peterson Institute for International Economics, said China had met 67 percent of its agricultural procurement targets as of last November, but only 52 percent and 31 percent for manufacturing products and energy products, respectively. Proponents of the agreement cite falling energy prices due to the epidemic as one reason for the poor delivery of energy import targets. Others have questioned the validity of the numerical targets.
According to the report, Simon Lester, deputy director of trade policy studies at the Cato Institute, said that even when it was first signed, there was no expectation that the targets would be met. He said China’s failure to meet the targets illustrates just how problematic it is to let governments manage trade.
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