By: Azhar Azam
*This is one of my opinion pieces (unedited) that first appeared at "China Global Television Network (CGTN)" https://news.cgtn.com/news/2019-12-19/Far-reaching-U-S-gains-from-phase-one-trade-deal-MyjjmNoqkM/index.html and was republished by "China Daily" http://global.chinadaily.com.cn/a/201912/20/WS5dfc39eaa310cf3e3557f818.html
At the back of nearly two years of diplomatic rhetoric, enacting retaliatory tariffs and tensed negotiations between the two largest economies of the world – last week, China and the United States finally agreed on a consensus text of the “phase one” economic and trade deal.
The agreement between the both sides on intellectual property rights, technology transfer, agriculture products, exchange rate and transparency, trade expansion, bilateral assessment and dispute settlements – based on the principle of “equality and mutual trust” – is far more important than the abrupt trade gains by either of the countries.
Right from the flare-up of the trade war by the US President Donald Trump, Washington has been consistently accusing Beijing for currency manipulation and forced technology transfer as well as showing reluctance to open up its market and being lenient on IP protection.
Through the maiden trade treaty, China benignly coped with all the US fundamental gripes although it had some deep concerns over American flimsy allegations. Beijing has also been mindful of the downward pressure on the global economy so it made intense efforts to chill the trade war with Washington and jointly step ahead to boost the confidence of global economies, stabilize financial markets and shape up a favorable environment for worldwide investments and trade activities.
China’s notion toward a trade truce in a bid to resurrect the global economic development impressed the US. On Saturday, US Treasury Secretary Steven Mnuchin endorsed Chinese viewpoint and stated that the trade deal between China and the US was “very good” for global economic growth.
Mnuchin comments “This deals with intellectual property, this deals with technology transfer, it deals with structural agricultural issues, financial services and opening up, currency understandings, as well as a commitment to purchase US agriculture and US goods” further enumerated that the “phase one” deal should be viewed in the bigger China-US economic and trade perspective.
China has surely pledged to ramp up its agriculture imports from the US and the move will certainly embolden the trade war-battered American farmers to increase their agriculture and food exports, comprising corn, meat, poultry and soybean, to China.
There is endemic debate going on the world over as how Beijing would be able to make big farm purchases from Washington, expressly soybean. The discussion should more exactly be focused on, is the US in a position to meet massive Chinese soybean domestic consumption – having conceded its top oilseed production slot to Brazil. Beijing was the largest soy buyer in the world with imports of more than 82 million tons of the oilseeds in the first eleven months of 2019.
Even before the “phase one” deal was formally announced, China indeed wanted to deescalate the trade war and it persuasively demonstrated the intent by raising its soybean imports from the US. And 13 times increase in Chinese imports of the American soy between September and November year-on-year is testament of its willingness to fulfill its US agriculture purchase commitments.
Agriculture trade data and China’s conformation to the key US demands about improved IP protection, opening up market, resilience on technology transfer and the measures on currency stabilization – showed Beijing’s gritty drive to wind down trade strains with Washington.
In exchange for a far-reaching trade deal with China, the Trump administration still maintained 25% tariffs on approximately $250 billion of Chinese goods and halved tariffs to only 7.5% on the other $120 billion of imports from China. As the US smaller tariff rollback would hardly endow any plausible push to Beijing’s exports to Washington or the global economy, the deal predominantly benefited the US.
New York-based leading global investment banking, securities and investment management company, Goldman Sachs, was disappointed with the US miniscule tariff reduction on the Chinese goods that forecasted it to be at least double than the actual 7.5%. “The reduction is only half as large as our baseline assumption,” said Goldman’s chief economist Jan Hatzius.
Hatzius’ reading of the China-US “phase one” covenant overtly spoke about the US inflexibility and Chinese clemency for reaching a trade deal and cued that the US steps were insufficient to refresh the bilateral trade relations and provide a fillip to the global economy.
Considering US the biggest economy of the world, the global markets would have expected a much rational American reaction to Chinese profounder spirit. If the US was seriously concerned about the global economy, the tariff reduction on Chinese goods should have greater than the analysts’ predictions.
The US needs to learn from China’s strategy to advance its economic development by promoting high-quality and competitive goods and services imports from all countries including America. It should therefore pursue to phase out additional tariffs on Chinese goods more bigheartedly to truly stimulate bilateral trade and global economy and financial stability.
*This is one of my opinion pieces (unedited) that first appeared at "China Global Television Network (CGTN)" https://news.cgtn.com/news/2019-12-19/Far-reaching-U-S-gains-from-phase-one-trade-deal-MyjjmNoqkM/index.html and was republished by "China Daily" http://global.chinadaily.com.cn/a/201912/20/WS5dfc39eaa310cf3e3557f818.html
At the back of nearly two years of diplomatic rhetoric, enacting retaliatory tariffs and tensed negotiations between the two largest economies of the world – last week, China and the United States finally agreed on a consensus text of the “phase one” economic and trade deal.
The agreement between the both sides on intellectual property rights, technology transfer, agriculture products, exchange rate and transparency, trade expansion, bilateral assessment and dispute settlements – based on the principle of “equality and mutual trust” – is far more important than the abrupt trade gains by either of the countries.
Right from the flare-up of the trade war by the US President Donald Trump, Washington has been consistently accusing Beijing for currency manipulation and forced technology transfer as well as showing reluctance to open up its market and being lenient on IP protection.
Through the maiden trade treaty, China benignly coped with all the US fundamental gripes although it had some deep concerns over American flimsy allegations. Beijing has also been mindful of the downward pressure on the global economy so it made intense efforts to chill the trade war with Washington and jointly step ahead to boost the confidence of global economies, stabilize financial markets and shape up a favorable environment for worldwide investments and trade activities.
China’s notion toward a trade truce in a bid to resurrect the global economic development impressed the US. On Saturday, US Treasury Secretary Steven Mnuchin endorsed Chinese viewpoint and stated that the trade deal between China and the US was “very good” for global economic growth.
Mnuchin comments “This deals with intellectual property, this deals with technology transfer, it deals with structural agricultural issues, financial services and opening up, currency understandings, as well as a commitment to purchase US agriculture and US goods” further enumerated that the “phase one” deal should be viewed in the bigger China-US economic and trade perspective.
China has surely pledged to ramp up its agriculture imports from the US and the move will certainly embolden the trade war-battered American farmers to increase their agriculture and food exports, comprising corn, meat, poultry and soybean, to China.
There is endemic debate going on the world over as how Beijing would be able to make big farm purchases from Washington, expressly soybean. The discussion should more exactly be focused on, is the US in a position to meet massive Chinese soybean domestic consumption – having conceded its top oilseed production slot to Brazil. Beijing was the largest soy buyer in the world with imports of more than 82 million tons of the oilseeds in the first eleven months of 2019.
Even before the “phase one” deal was formally announced, China indeed wanted to deescalate the trade war and it persuasively demonstrated the intent by raising its soybean imports from the US. And 13 times increase in Chinese imports of the American soy between September and November year-on-year is testament of its willingness to fulfill its US agriculture purchase commitments.
Agriculture trade data and China’s conformation to the key US demands about improved IP protection, opening up market, resilience on technology transfer and the measures on currency stabilization – showed Beijing’s gritty drive to wind down trade strains with Washington.
In exchange for a far-reaching trade deal with China, the Trump administration still maintained 25% tariffs on approximately $250 billion of Chinese goods and halved tariffs to only 7.5% on the other $120 billion of imports from China. As the US smaller tariff rollback would hardly endow any plausible push to Beijing’s exports to Washington or the global economy, the deal predominantly benefited the US.
New York-based leading global investment banking, securities and investment management company, Goldman Sachs, was disappointed with the US miniscule tariff reduction on the Chinese goods that forecasted it to be at least double than the actual 7.5%. “The reduction is only half as large as our baseline assumption,” said Goldman’s chief economist Jan Hatzius.
Hatzius’ reading of the China-US “phase one” covenant overtly spoke about the US inflexibility and Chinese clemency for reaching a trade deal and cued that the US steps were insufficient to refresh the bilateral trade relations and provide a fillip to the global economy.
Considering US the biggest economy of the world, the global markets would have expected a much rational American reaction to Chinese profounder spirit. If the US was seriously concerned about the global economy, the tariff reduction on Chinese goods should have greater than the analysts’ predictions.
The US needs to learn from China’s strategy to advance its economic development by promoting high-quality and competitive goods and services imports from all countries including America. It should therefore pursue to phase out additional tariffs on Chinese goods more bigheartedly to truly stimulate bilateral trade and global economy and financial stability.