Us China Agreement Phase 1

Data Sharing Notice: This update is based on data of 25 November 2020 published on 25 November 2020 for Chinese and US exports – provisional data on US exports to China, which are monitored under the agreement, are now published before the full release scheduled for 7 December 2020. The next update will be based on data from November 2020, which will be published on December 25, 2020 (Chinese imports) and December 23, 2020 (U.S. exports). Provisional U.S. export data for October were zero for aircraft (harmonized customs plan 8800 and 8802); All revisions to the data will be included in a review that was published on December 7. Chinese customs reported that imports of Chinese aircraft (8802) were only $506 million in October. Under the agreement, China has committed to purchase as much as $63.9 billion of U.S. covered goods by the end of 2020 compared to those basic plans for 2017. The definition of the baseline for 2017 based on Chinese import statistics implies a purchase target of $173.1 billion for 2020 (in red in panel a). The definition of the baseline for 2017 based on U.S. export statistics implies a target of $159.0 billion by 2020 (blue in panel a). All these obstacles and complications lead to political failure.

Regardless of who is president, the United States must get China to liberalize its tariffs, reduce non-tariff barriers, and streamline its subsidies and other practices that distort economic incentives. In response to Trump`s trade war, China imposed additional tariffs on more than 50 percent of U.S. exports in 2018 and 2019. It is mysterious that the legal text of the first phase of the agreement did not remove, reduce or even mention the word “tariffs,” and it did little to address the major trade problems that the United States has with China. Instead, the Trump administration has provided an excellent case study on why simple purchase commitments can`t go around. For both U.S. export data and Chinese import data, the 2020 supplementary trade targets (in addition to the initial 2017 value) are $12.5 billion (agriculture), $32.9 billion (industrial products) and $18.5 billion (energy). These objectives are contained in Appendix 6.1 of the agreement. Starting with our October 26, 2020 report, we have seasonally adjusted the monthly purchase commitment targets to reflect this month`s relative weight for these products in the 2017 trade data. Note that the monthly targets for the end of 2020 serve only to illustrate.

There is nothing in the text of the agreement to indicate that China must achieve anything other than the end-of-year targets. The monetary agreement contains Commitments from China to abandon competitive currency devaluations and not to steer its exchange rate towards a trade advantage – a language that China has accepted for years as part of its commitments to the Group of 20 major economies. Nevertheless, the Phase 1 agreement did not resolve Washington`s fundamental differences with Beijing, which depends on massive state intervention in the economy to turn China into a technological powerhouse. Despite a recent Report by the Trump administration, which suggests another thing, U.S. agricultural exports to China have yet to meet commitments made in the first phase.7 Although better than manufacturing, it was not until September that agricultural exports returned to their pre-market level (Figure 3).