Geneva: China has scored a partial victory with the US in the festering trade war, after the embattled Trump administration in principle agreed on Friday for freezing new tariffs against Chinese goods worth $250 billion, say analysts.
In return, Beijing would purchase $40-$50 billion worth of American farm products such as soybeans and pork among others. The large quantum of Chinese purchase of farm products is a bonanza for American farmers, President Donald Trump claimed.
For the past 18 months, the US farmers, particularly in Iowa and other mid-western states, are restive with the trade war against China as it had resulted in huge losses. The US administration was forced to provide trade-distorting farm subsidies to the tune of $12 billion to its farmers because of the losses suffered in the Chinese market.
“The deal I just made with China is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Council," Trump tweeted on Saturday. The US farmers, he insisted, would have to find new land for realizing the Chinese purchases that have dropped precipitously from $21 billion in 2017 due to the trade war.
China, however, has not publicly confirmed about the large purchase of American farm products, nor other aspects of the understanding reached on intellectual properties and currency management with the US.
Beijing merely suggested that “substantial progress" has been achieved but did not indicate the elements of the understanding reached with the US. “If you’re China, you are pretty happy with the outcome," Arthur R Kroeber, founder of Beijing-based consultancy Gavekal Dragmomics said of the latest trade talks, according to the Wall Street Journal on 12 October.
“China’s negotiating position has always been, the longer you can extend the talks the bette," Kroebar said.
The US administration will retain the existing additional tariffs it had imposed on the Chinese goods. According to President Trump, a bigger trade deal with China will come in three stages over the next several months. The in principle agreement is largely about the immediate purchase of American goods and shelving tariffs on Chinese goods.
More complex and difficult issues involving structural changes in the Chinese trading and economic system as demanded by the US would be discussed in the second stage, Trump maintained. The preliminary trade détente between the US and China is mutually-beneficial for the time being. The Chinese chief negotiator He maintained that the trade deal is good for global “growth, prosperity and development."
But it has deferred the most difficult negotiations on the US’ demands involving sweeping changes in the Chinese intellectual property provisions, including an end to the alleged forced transfer of technology, state-owned subsidies to the Chinese hi-tech companies, and other market access barriers.
When asked whether China raised the issue of ban on Huawei and the black-listing of 28 Chinese entities, the US Trade Representative Ambassador Lighthizer replied that they are being addressed on a separate track.
Clearly, any progress on the structural issues involving changes in the Chinese trading and economic system could hinge on what the US will do in removing the intransigent barriers it had imposed for the Chinese tech companies, especially Huawei, said a Geneva-based analyst, who asked not to be quoted.
So far, the US' barriers on access to Chinese tech-companies, particularly to its telecom giant Huawei, has been de-coupled from the tariff and market access talks that the USTR Ambassador Robert Lighthizer had conducted on an aggressive footing. But, at some point, the tech-related issues raised by China will find their way into the negotiations involving market access and structural issues in the Chinese trading system as sought by Ambassador Lighthizer.
President Trump maintained that there will be no visa and other curbs on the entry of Chinese students into the elite American universities. He expressed confidence that the two sides will finalize the first-phase of the trade deal by the time he meets China’s President Xi Jinpomg, in mid-November, at the Asia-Pacific Economic Cooperation summit in China. Trump, who is currently facing serious electoral headwinds for his second term next year, also downplayed the Hong Kong democracy protests at the press conference on Friday.
When asked about the divisive issue of bilateral dispute-resolution mechanism sought by the US, Ambassador Lighthizer merely suggested that suggested it is still being discussed. The USTR has repeatedly insisted on a strong “enforcement" mechanism in which Washington can impose retaliatory tariffs on China whenever Beijing is found to have failed to deliver on the commitments set out in the trade agreement.
Ambassador Lighthizer is also not prepared to accept China’s demand for a complete phase-out of all additional tariffs that the US had imposed until now, according to several analysts.
China, on the other hand, wants a balanced deal that includes a two-way enforcement mechanism and elimination of all additional duties imposed since last year. It is willing to commit for a sizeable quantum purchases of farm products, particularly soybeans and pigs, based on what its market and international markets can bear.