(Bloomberg): The US and China signed what they billed as the first phase of a broader trade pact amid persistent questions over whether President Donald Trump’s efforts to rewrite the economic relationship with Beijing will ever go any further.
The deal commits China to do more to crack down on the theft of American technology and corporate secrets by its companies and state entities, while outlining a $200 billion spending spree to try to close its trade imbalance with the US. It also binds Beijing to avoiding currency manipulation to gain an advantage and includes an enforcement system to ensure promises are kept.
The ceremony - in a packed East Room at the White House - marked a rare moment of friendship lately between the world’s two largest economies. Acrimonious talks stretching back almost three years have roiled financial markets, cast a cloud of uncertainty over investment decisions and hurt growth in both nations.
“This is a very important and remarkable occasion,” Trump said. Fixing what he sees as the injustices of past trade deals is “probably the biggest reason why I ran for president,” he added. “Together we are righting the wrongs of the past.”
In a letter to Trump read out at the ceremony, Chinese leader Xi Jinping said the deal proved the two sides could work together to bridge their differences and declared it “good for China, the US and the whole world.”
Together we are righting the wrongs of the past
Calling a truce
The deal seems most focused on arriving at peace in the trade war between the world’s two largest economies. Among its requirements is a resumption of the economic dialogues that past administrations have held with China.
But the new pact has already been criticized for what is missing. It does nothing to address areas like what US authorities have long claimed is China’s state-backed hacking of American companies and government institutions. Nor does it require the Asian power to reform the vast web of state subsidies that form the spine of its model of state capitalism and have helped fuel the rapid growth of Chinese companies internationally.
Deal gaps will be filled
The administration says many of those issues will be covered in a second phase of a deal, though when those talks will begin and how long they will take remains uncertain. In the meantime, the US is also set to maintain tariffs on roughly two-thirds of imports from China, something that Trump said was essential as leverage over the country until it agreed to further reforms.
“As soon as this kicks in we’re starting phase two,” Trump said. “I will agree to take those tariffs off if we’re able to do phase two, otherwise we don’t have any cards to negotiate with.”
Trump’s top negotiator, US Trade Representative Robert Lighthizer, told reporters ahead of the signing that the administration was focused on implementing the initial agreement in the short term. Any further negotiations would only come after that, he said, adding that the initial implementation of phase one could take until the spring.
But the lack of clarity on where things would go next also led many to call for those to be pursued more urgently so that tariffs could be lifted. The US Chamber of Commerce said it was critical for the two sides to begin negotiations on a second phase “as soon as possible” .
“The work isn’t done yet,” said Craig Allen, head of the US-China Business Council, which represents American companies doing business in the Asian nation. “The phase-one agreement should be swiftly followed by continued phase-two negotiations on remaining issues.”
* Beijing must deliver an action plan within 30 days of the deal taking effect on how it intends to meet its commitments on intellectual property.
* There is a broad commitment for China to stop pressuring American companies investing in the country to share technology with local joint-venture partners.
* Its government must stop supporting or directing Chinese firms to buy up strategic technologies by acquiring foreign companies.