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US and China “close to finalising” part of a Phase One trade deal
If an agreement on Chi- na buying US agricultural products can be sealed, Beijing in return would ex- empt some US agricultural products from tariffs, in- cluding soybeans, wheat and corn, a China-based source told Reuters.
US and Chinese officials are “close to finalising” some parts of a trade agreement after recent high-level telephone dis- cussions, the US Trade Representative’s office and China’s Commerce Ministry said, with talks to continue.
The USTR provided no details on the areas of pro- gress.
“They made headway on specific issues and the two sides are close to fi- nalising some sections of the agreement,” a state- ment said.
“Discussions will go on continuously at the deputy level, and the principals will have another call in the near future.”
Washington and Bei- jing are working to agree on the text for a ‘Phase One’ trade agreement an- nounced by US President Donald Trump on Octo- ber 11.
Trump has said he hopes to sign the deal with Chi- na’s President Xi Jinping next month at a summit in Chile.
In a separate statement posted on China’s Min- istry of Commerce web- site, Beijing confirmed “technical consultations” on some parts of a trade agreement were basically completed.
Agricultural products are a major area of dis- cussion.
China’s Commerce Min- istry said both sides con- firmed the US will import Chinese-made cooked poultry and catfish prod- ucts, while China will lift a ban on US poultry.
Beijing wants the US to cancel some existing US tariffs on Chinese im- ports, people briefed on the Friday call told Reu- ters, in return for pledging to step up its purchases of US commodities like soybeans.
The US wants Beijing to commit to buying these products at a specific time and price, while Chinese buyers would like the dis- cretion to buy based on market conditions.
The world’s two largest economies are trying to calm a nearly 16-month trade war that is roiling financial markets, dis- rupting supply chains and
slowing global economic growth.
“They want to make a deal very badly,” Trump told reporters at the White House recently.
“They’re going to be buying much more farm products than anybody thought possible.”
Trump agreed earlier in October to cancel an October 15 increase in tariffs on $250 billion in Chinese goods as part of a tentative agreement on agricultural purchases, in- creased access to China’s financial services mar- kets, improved protections for intellectual property rights and a currency pact.
White House advis- ers are hoping to cement a binding, enforceable agreement with Beijing, including a pledge not to force US companies to transfer technology to Chinese companies to do business there.
Tariffs take the lead
Beijing was expected to ask Washington during the recent call to drop its plan to impose tariffs on $156 billion worth of Chi- nese goods, including mo- bile phones, laptop com- puters and toys, on De- cember 15, two US-based sources told Reuters.
Beijing is also seeking removal of 15 percent tariffs imposed on Sep- tember 1 on about $125 billion of Chinese goods, one of the sources said.
Trump imposed the tariffs in August after a failed round of talks.
“The Chinese want to get back to tariffs on just the original $250 billion
in goods,” the source said. US farmers have been struggling since the trade
war started.
In the decade be-
fore Trump took office, China’s purchases of US agriculture and related products tripled, reaching $25.2 billion in 2016.
But they dropped to $13.2 billion in 2018, after the US put tariffs on hun- dreds of billions of dollars of Chinese goods.
Derek Scissors, a resi- dent scholar and China expert at the American Enterprise Institute in Washington, said the orig- inal goal of the early Oc- tober talks was to final- ise a text on intellectual property, agriculture and market access to pave the way for a postponement of the December 15 tariffs.
Phase One will not cover US allegations of Chinese hacking into US com- panies and government agencies, state subsidies, Beijing’s alleged dump- ing of lower-priced prod- ucts on global markets or China’s involvement in the fentanyl market, one person briefed on the ne- gotiations said.
An intellectual property rights chapter in the agree- ment largely deals with copyright and trademark issues and pledges to curb technology transfers that Beijing has already put into a new investment law, people familiar with the discussions said.
A scaled-down deal
If an agreement on Chi- na buying US agricultural products can be sealed, Beijing in return would
exempt some US agricul- tural products from tar- iffs, including soybeans, wheat and corn, a China- based source told Reuters.
But the ultimate amounts of China’s purchases are uncertain.
Trump has touted pur- chases of $40 billion to $50 billion annually – far above China’s 2017 pur- chases of $19.5 billion as measured by the Ameri- can Farm Bureau.
One of the sources briefed on the talks said China’s offer would start at around $20 billion in annual purchases, largely restoring the pre-trade- war status quo, but this could rise over time.
Purchases also would depend on market condi- tions and pricing.
USTR head Robert Ligh- thizer has emphasised China’s agreement to re- move some restrictions on US genetically modi- fied crops and other food safety barriers, which US sources say could pave the way for much higher US farm exports to China.
The recent high-level call came a day after US Vice President Mike Pence railed against Chi- na’s trade practices and what he termed construc- tion of a “surveillance state” in a major policy speech.
But Pence left the door open to a trade deal with China, saying Trump wanted a “constructive” relationship with Beijing.
While the US tariffs on Chinese goods have brought Beijing to the ne- gotiating table to address US grievances over trade and intellectual prop- erty practices, they have not sparked significant change in China’s state- led economic model.
Some China trade ex- perts said a completion of a Phase One deal could leave little incentive for China to negotiate further, especially with a US elec- tion in 2020.
“US-China talks change very quickly from hot to cold but, the longer it takes to nail down the easy Phase One, the hard- er it is to imagine a Phase Two breakthrough,” Scis- sors said.
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National Poultry Newspaper, November 2019 – Page 11