US and China Reach ‘Phase One’ Trade Deal, but Implementation Is Up to Beijing

Chinese leader Xi Jinping greets U.S. President Donald Trump in Beijing. (Image:  YouTube/Screenshot)
Chinese leader Xi Jinping greets U.S. President Donald Trump in Beijing. (Image: YouTube/Screenshot)

After a year and a half of escalations in the Sino-U.S. trade war, officials in Washington and Beijing have announced the completion of a “phase one” trade deal. 

While the deal represents a bright spot in the strained relationship between the world’s two largest economies, the difficulties now remain in squaring the commitments demanded of China in the agreement with the political intrigues of the country’s ruling Communist Party. 

The United States announced the deal in the late morning, with the White House website stating it “reached an historic and enforceable agreement on a Phase One trade deal.” The statement described it as “a tremendous victory for the American economy,” saying that China had “agreed to structural reforms in areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.” 

In addition, U.S. trade officials said that the People’s Republic of China had promised to buy $32 billion more in U.S. farm products over the next two years, on top of a baseline of $24 billion in purchases in 2017. The PRC also agreed to make a “big effort” in spending an additional $5 billion a year. 

(Image: Screenshot / YouTube)

In addition, U.S. trade officials said that the People’s Republic of China had promised to buy $32 billion more in U.S. farm products over the next two years, on top of a baseline of $24 billion in purchases in 2017. (Image: Screenshot / YouTube)

According to U.S. Trade Representative Robert Lighthizer, Beijing had agreed to import at least $200 billion in additional U.S. goods and services over the next two years on top of the amount the PRC purchased in 2017. If fulfilled, this promise would greatly even out the U.S.-China trade imbalance.

In exchange, the United States cancelled a round of fresh tariffs scheduled for Dec. 15 to cover $160 billion worth of Chinese imports, while slashing existing tariffs on $120 billion worth of Chinese imports from 15 to 7.5 percent. A 25 percent tariff on $250 billion in Chinese goods will remain in place. 

The agreement comes over one year after the December 2018 meeting between the two countries’ leaders, President Donald Trump and General Secretary Xi Jinping, in Argentina, where both pledged to start negotiations to end the trade war that began that spring. 

Both sides have levied tariffs on hundreds of billions of dollars’ worth of exports from across the Pacific Ocean. In exchange for America’s 15- and 25-percent tariffs on more than $300 billion dollars of Chinese goods, Beijing slapped duties on U.S. agricultural products, aiming at Trump’s rural voter base. 

Ball in China’s court 

In China, official reaction to the deal was far more subdued. The Chinese government held a press conference at 11 p.m. Beijing time, shortly after the announcement in the United States. There, only vice-ministerial-level officials appeared, and descriptions of the agreement that they were far more summarized, avoiding many of the details offered. 

Wang Shouwen, deputy head of the Chinese Ministry of Commerce, said that the 86-page agreement contained nine chapters covering the topics mentioned by the White House. 

In contrast to Lighthizer’s comments that he could sign the deal in January with his counterpart, Chinese Vice Premier Liu He, PRC officials said that the deal could be signed “as soon as possible,” after translation and legal review were completed. 

Negotiations to end the trade war, which started when the Trump administration made good on its campaign promises to hold China accountable for its unfair trade practices, have been fraught with difficulty. 

U.S. Trade Representative Robert Lighthizer and his Chinese counterpart, Vice Premier Liu He, have been leading the Sino-U.S. trade negotiations. (Image: via SupChina)

U.S. Trade Representative Robert Lighthizer and his Chinese counterpart, Vice Premier Liu He, have been leading the Sino-U.S. trade negotiations. (Image: via SupChina)

“Ultimately, whether this whole agreement works is going to be determined by who’s making the decisions in China, not in the United States,” Lighthizer said Dec. 14 on the CBS program Face the Nation.  

“If the hardliners are making the decisions, we’re going to get one outcome,” Lighthzier said. “If the reformers are making the decisions, which is what we hope, then we’re going to get another outcome.” 

Many are skeptical about whether Communist Party-ruled China would actually follow through on the phase one deal, or if it can even be inked on schedule next January. 

Following the Xi-Trump summit on the sidelines of the G-20 meeting in Argentina on Dec. 1, 2018, American and Chinese negotiators had held 11 rounds of trade talks in Washington and Beijing. 

A full deal was around 90 percent complete, according to the Trump administration, when the Chinese leadership suddenly backtracked on many of the critical items negotiators had agreed on earlier.  

It was four months after the next Xi-Trump summit in Osaka, Japan, that the Trump administration and the Xi leadership announced that a smaller-scale deal was in the works. 

Xi vs Communist Party factions

China watchers observed that the 90 percent complete deal being negotiated this spring may have been killed by political infighting within the Chinese Communist Party (CCP). 

“Xi’s political rivals and Party ‘hardliners’ opposed the draft trade deal back in May after they obtained translated copies of it; Xi will likely encounter similar, if not more, resistance after the 86-page ‘phase one’ deal is translated and reviewed by the CCP elite,” wrote analysts at SinoInsider, a political risk consultancy. 

Challenging the conventional view of Xi Jinping as a true strongman in the mold of founding PRC leader Mao Zedong, SinoInsider’s experts have argued that the Xi leadership has actually spent its seven years in power fighting a desperate behind-the-scenes battle with entrenched vested interests in the CCP.

A Dec. 16  commentary by the Chinese-language Epoch Times observed that between Dec. 9 and Dec. 16, Xi Jinping promoted hundreds of generals in the People’s Liberation Army.

Xi Jinping has ordered the PLA to end 'paid services' several times since 2015. (Image: File Photo)

Xi Jinping recently promoted hundreds of Chinese generals, apparently in a show of force to his rivals within the CCP. (Image: File Photo)

 

“There is no doubt that Xi Jinping did this as a show of force to those who were opposed to signing the first trade agreement [this May],” The Epoch Times wrote. “Using these means, he showed clearly the Jiang Zemin faction, the Maoists, and other anti-Xi elements that the deal absolutely has to be signed this time.” 

Former Communist Party leader Jiang Zemin, who enjoyed a period of political dominance between 1997 and 2011, is considered the central figure in the strongest faction opposing Xi Jinping. Though Xi launched a massive anti-corruption to rid the Party of Jiang’s influence, it has only seen mixed results. 

Follow us on Twitter or subscribe to our newsletter

Trust Enables a Hero of His Time
Second Chinese Aircraft Carrier Enters Official Service