Key flaw in the US-China phase-one agreement
The much-trumpeted phase-one agreement aimed at ending the trade tensions between the US and China is proving to be of little help so far to US exporters.
In a detailed new report, non-profit research organisation The Peterson Institute for International Economics has said that, even without the effects of the coronavirus on the Chinese economy, it would have been difficult for China to meet a commitment on increased purchasing of US products.
This commitment was part of a phase-one trade deal that the world’s two biggest economies agreed on December 13. It says China will import an additional $200 billion of US-made goods and services before the end of 2021.
“It will be hard enough for China to meet this commitment as it stumbles through an economy now afflicted by the coronavirus disease,” the Peterson Institute said. However, it pointed out that even before the outbreak, the phase-one agreement contains “a key flaw”.
Trade tensions between China and the US built up for two years, from the start of 2018 until the end of 2019. When the US increased tariffs on exports from China, its Asian trading partner reciprocated. The phase-one agreement makes no mention of China now lowering those tariffs.
For agricultural goods, China’s average tariff on imports from the US rose from 17.6% before the trade tensions kicked in to more than 40% in February 2020. The average rate on comparative products from other parts of the world is 16.4%.
With few market incentives for China’s private sector to purchase US goods, owing to the still-high tariffs, the Peterson Institute has concluded that President Donald Trump seems to be banking on the Chinese government to direct its state-owned enterprises “to pick up the slack”.
