What is actually in the US-China ‘Phase One’ trade deal?

The United States and China have agreed on the terms of a “Phase One” trade deal that reduces some U.S. tariffs on Chinese goods and is said to boost Chinese purchases of American farm, energy and manufactured goods while addressing some disputes over intellectual property.

Neither side has released many specific details of the agreement, which the United States says is 86 pages.

Chinese officials are describing the deal in guarded terms, not publicly confirming much of Washington’s version – especially on goods purchase commitments.

Following are key details that have been released so far.


The United States suspended planned 15% tariffs that were scheduled to go into effect on Sunday on nearly $160 billion worth of Chinese goods, including cell phones, laptop computers, toys and clothing.

China canceled its retaliatory tariffs due to take effect that same day, including a 25% tariff on U.S.-made autos.

The U.S. Trade Representative’s office said it would cut by half the tariff rate it imposed on Sept 1 on a $120 billion list of Chinese goods, to 7.5%

U.S. tariffs of 25% on $250 billion worth of Chinese goods will remain unchanged, providing U.S. negotiating leverage for a second phase of negotiations next year, according to USTR.


U.S. officials say China agreed to increase purchases of American products and services by at least $200 billion over the next two years – nearly doubling U.S. exports to China – with an expectation that the higher purchases will continue after that period.

The purchases include manufactured goods, agricultural goods, energy and services, and are expected to reduce the $419 billion U.S. trade deficit with China, officials said. China bought $130 billion in U.S. goods in 2017, before the trade war began, and $56 billion in services, U.S. data show.

China has made no mention of hard targets but has said it will import more U.S. wheat, rice, corn, energy, pharmaceuticals and financial services.

Ning Jizhe, vice chairman of China’s state planning agency, the National Development and Reform Commission, said the exact amount of import increases will be announced later.


China has committed to increase purchases of U.S. agriculture products by $32 billion over two years, USTR said.

That would average an annual total of about $40 billion, compared with a baseline of $24 billion in 2017 before the trade war started – an increase that may be difficult to achieve, judging from China’s past purchases of U.S. farm goods.

Trump has said that China may buy $50 billion worth of American farm goods annually. U.S. Trade Representative Robert Lighthizer said China agreed to make its best efforts to increase purchases by another $5 billion annually to get close $50 billion.

USTR says China has committed to reduce nontariff barriers to agricultural products such as poultry, seafood and feed additives as well as approval of biotechnology products.


USTR said the deal includes stronger Chinese legal protections for patents, trademarks, copyrights, including improved criminal and civil procedures to combat online infringement, pirated and counterfeit goods.

The deal contains commitments by China to follow through on previous pledges to eliminate any pressure for foreign companies to transfer technology to Chinese firms as a condition of market access, licensing or administrative approvals and to eliminate any government advantages for such transfers, according to USTR.

The U.S. trade agency also said China agreed to refrain from directly supporting outbound investment aimed at acquiring foreign technology to meet its industrial plans – transactions already restricted by stronger U.S. security reviews.

Chinese Vice Minister of Commerce Wang Shouwen said the two countries have reached a consensus on cracking down on counterfeit goods and stepping up protection of intellectual property, but at China’s own pace.


The currency agreement contains pledges by China to refrain from competitive currency devaluations and to not target its exchange rate for a trade advantage, according to USTR. China has accepted such language for years as part of its commitments to the Group of 20 major economies.

The deal subjects any violations of currency commitments to the agreement’s enforcement mechanism, under which they could incur U.S. tariffs, U.S. officials said.

A senior Trump administration official said the currency agreement is based on provisions in the U.S.-Mexico-Canada Agreement trade deal, which require the three countries to disclose monthly data on international reserve balances and intervention in foreign exchange markets, along with quarterly balance-of-payments data and other public reporting to the International Monetary Fund.


Under dispute resolution is an arrangement allowing parties to resolve differences over how the deal is implemented through bilateral consultations, starting at the working level and escalating to top-level officials, U.S. officials said.

If these consultations do not resolve disputes, there is a process for imposing tariffs or other penalties.

Lighthizer told reporters the United States expected neither side would retaliate if appropriate action was taken as part of the process and following “consultation in good faith.”

But people briefed on the talks said there is nothing in the agreement that would ultimately prohibit such retaliation.


U.S. officials said the deal includes improved access to China’s financial services market for U.S. companies, including in banking, insurance, securities and credit rating services. It aims to address a number of longstanding U.S. complaints about investment barriers in the sector including foreign equity limitations and discriminatory regulatory requirements.

China, which has pledged for years to open up its financial services sector to more foreign competition, said the deal would boost imports of financial services from the United States.

China’s state-run Global Times newspaper pointed out that not all foreign institutions will be able to tap China’s financial market. “Naturally, entities from countries which are friendly to China will be favored by the Chinese people,” the paper said in a commentary published the day before the deal was announced.

Source from: The Peninsula