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January 16, 2020 04:41 PM

U.S., China take first step toward broader trade deal

Miles Moore
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    WASHINGTON—The U.S. and China have signed a "Phase One" trade agreement designed to be the first step in a comprehensive trade deal with China.

    The Phase One agreement, signed Jan. 15, offers structural reform to Chinese regulations in the areas of intellectual property, technology transfer, agriculture, financial activities and currency and foreign exchange, according to a fact sheet issued by the Office of the U.S. Trade Representative.

    It halves the U.S. tariffs on some $120 billion worth of goods imported to the U.S. from China, to 7.5% from 15%.

    These products include retreaded tires, conveyor belts, rubber hoses, rubber footwear and a number of chemicals.

    However, the 25% tariffs on $250 billion worth of other Chinese goods remain in place, including autos and auto parts.

    The Motor & Equipment Manufacturers Association (MEMA) did not issue a statement on the signing of the trade deal. However, when the agreement was announced Dec. 13, MEMA said it hoped the Trump administration would reconsider the tariffs on autos and auto parts.

    "In many cases, these tariffs are causing financial strain on suppliers across the U.S.," the association said at the time.

    Two other associations — the National Association of Manufacturers (NAM) and the Alliance for American Manufacturing (AAM) — had diametrically opposed reactions to the Phase One deal.

    NAM President and CEO Jay Timmons, who attended the signing of the agreement at the White House, praised President Trump and U.S. Trade Representative Robert Lighthizer.

    "No other administration has achieved this level of success with — and accountability of — America's primary economic adversary in the past three decades," Mr. Timmons said.

    The AAM, on the other hand, said the agreement offered inadequate protections to American workers.

    "More than 3.7 million American jobs — 2.8 million them in manufacturing — were lost between 2001 and 2018 because of lopsided trade deficits with China," the AAM said on its website.

    "Unfortunately, this deal doesn't do anything to stop the offshoring of American jobs," the alliance said. "China's massive subsidies, lax or nonexistent labor and environmental standards, out-of-control industrial overcapacity and state-owned enterprises are untouched by this agreement."

    According to the USTR, the Phase One agreement will:

    • Address longstanding concerns in the intellectual property area, including trade secrets, pharmaceuticals, geographical indications, trademarks and enforcement against counterfeit goods.
    • Set out binding and enforceable obligations to address China's unfair technology transfer practices.
    • Support a dramatic expansion of U.S. food, agriculture and seafood product exports to China.
    • Address a number of longstanding trade and investment barriers to U.S providers of financial services.
    • Address China's unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting of exchange rates while promoting transparency and providing mechanisms for accountability and enforcement.
    • Commit China to import U.S. goods and services over the next two years in a total amount that exceeds China's annual level of exports for those goods and services in 2017 by at least $200 billion.
    • Set forth an arrangement to ensure the effective implementation of the agreement and allow the parties to settle disputes fairly and expeditiously.

    Phase Two of the agreement, which presumably will address labor standards, the remaining tariffs and other pending issues, will not be issued until after the November election, according to the Trump administration.

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