Chinese factories, cities and transport links are shut as Beijing
fights the spread of the virus, dampening domestic demand for everything
from oil to consumer goods.
Under the trade deal, Beijing agreed to boost its U.S. purchases by
$200 billion over two years, a massive increase that many analysts said
was overly ambitious before the virus emerged.
PURCHASE TARGETS
In the text of the agreement, Beijing has pledged
https://www.reuters.com/article/us-usa-trade-china-details-factbox/whats-in-the-us-china-phase-1-trade-deal-idUSKBN1ZE2IF
to buy $76.7 billion of additional U.S. goods and services, on top of a
2017 baseline, in the 12 months that started Jan. 1, 2020, although the
agreement doesn’t formally take effect until Feb. 15, 2020.
It specifies an additional $123 billion in Chinese purchases for the second year, 2021.
Included in the first-year target are increases of $32.9 billion in
U.S. manufactured goods purchases, $12 billion for agricultural
products, $18.5 billion for energy and $12.8 billion for services.
The deal deliberately does not spell out when during the year these
goods should be purchased, in part because Beijing insisted that market
demand dictate purchase timing.
It says, “The Parties acknowledge that purchases will be made at
market prices based on commercial consideration and that market
conditions, particularly in the case of agricultural goods, may dictate
the timing of purchases within any given year.”
The deal text contains a disaster clause, yet to be formally invoked
by Beijing, to allow for delays: “In the event that a natural disaster
or other unforeseeable event outside the control of the Parties delays a
Party from timely complying with its obligations under this Agreement,
the Parties shall consult with each other.”
CONSULTATIONS
The form these consultations should take is not specified in the text.
Enforcement of the agreement relies heavily on a bilateral process,
with each side setting up an enforcement office to monitor compliance
with the deal and to field complaints from companies or other parties.
Any disputes in implementing the terms of the agreement, including
meeting China’s purchase targets, will progress up a chain of officials
over a 90-day period, from the working level, to vice ministers and
ultimately to U.S. Trade Representative Robert Lighthizer and Chinese
Vice Premier Liu He.
If a dispute cannot be resolved, the complaining party can levy tariffs in proportion to the damage caused by complaint.
China, however, would be prohibited from responding in kind to any
punitive U.S. tariffs. Beijing’s only recourse in that cause is to quit
the agreement.
Lighthizer has said the structure, which includes twice yearly
consultations with Liu, is aimed at resolving any disagreements
bilaterally. He has eschewed third-party dispute resolution mechanisms
in trade agreements.
The USTR “has not received any requests from China’s government to
discuss changes in China’s purchase commitments due to the coronavirus
outbreak,” a spokeswoman said.
The Trump administration considers trade and the coronavirus separate
issues, White House senior adviser Kellyanne Conway said Wednesday. In
the public health meetings she has been in, she said she’s never “heard
the word trade mentioned a single time.”
With wide swaths of China’s economy on lockdown, implementation of
the trade deal “will take a back seat” said Wendy Cutler, a former
deputy U.S. trade representative.
“The best thing the United States can do at this point is be
compassionate and recognize this and accept it, and not make abrasive
comments on what we expect,” Cutler told a trade conference in
Washington.
Cutler said that it is unlikely that virus-prompted delays would let
China “off the hook” for its purchase agreements, and Washington and
Beijing would find a way forward.
“There is a heavy incentive on both sides for this agreement to work,” she said.
