Many Phase 1 Trade Pact Unknowns, Including When Phase 2 Talks Will Begin
Uncertainties abound about the phase one trade agreement the U.S. and China announced Friday (see 1912130042), including when the rollback in the List 4A Section 301 tariffs to 7.5 percent will take effect. The Office of the U.S. Trade Representative didn't comment Monday. Tech was euphoric the List 4B duties were averted Sunday. But the 25 percent tariffs on the first three rounds of Chinese imports now appear destined to remain in force for as long as it takes the U.S. and China to negotiate a more comprehensive phase two trade agreement, leading many tech interests to express frustration.
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USTR Robert Lighthizer and Treasury Secretary Steven Mnuchin took the unusual step Sunday of shooting down as "totally false, untrue and baseless" Wall Street Journal reports that the U.S. promised to cut all existing tariffs in half in exchange for Chinese purchases of American agricultural products. "It did not happen," they said. The Journal didn't comment Monday.
There was mixed messaging Friday between the Chinese and the Trump administration about when the phase 2 talks will begin, let alone how long they might take. The start of those negotiations “will depend on the implementation of the Phase One agreement,” China Vice Commerce Minister Wang Shouwen told a Beijing news conference Friday. That appeared to contradict President Donald Trump’s Friday tweet that phase two talks will start immediately.
The U.S. and Chinese “working teams” will determine when the “followup consultations” on phase two will begin and where, said Wang. “I think this is understandable to you. We have just reached the Phase One agreement. The priority for us is to sign this agreement and make use of the agreement to promote economic trade cooperation between the two countries.”
Another unknown -- phase one’s intellectual property terms. Its IP “chapter” addresses “numerous longstanding concerns in the areas of trade secrets, pharmaceutical-related intellectual property, geographical indications, trademarks, and enforcement against pirated and counterfeit goods,” said a USTR fact sheet. It requires China to make “structural reforms” that enhance its IP protection regime and curb its allegedly unfair behavior, said USTR.
China thinks the phase one terms are “very much in line” with its “reforms” in strengthening IP protections, said a Commerce Ministry official Friday. “The truth is, for years, China has been enhancing its protection of intellectual property,” he said.
USTR’s Section 301 March 2018 investigative report found differently. The report concluded that “China’s acts, policies, and practices regarding cybertheft of intellectual property are unreasonable.” It bears watching to learn how phase one will bridge those two perspectives.
Phase one’s “dispute resolution” chapter suggests punitive and retaliatory tariffs will never be off the table for as long as the agreement remains in force. It creates an “arrangement” for regular bilateral consultations at both the principal level and the working level” for resolving confrontations, said the fact sheet. For disputes that can’t be resolved through consultation, Phase One authorizes “each party to take proportionate responsive actions that it deems appropriate,” it said.