Phase One Agreement

Details of the basic approach to mapping the 2020 annual targets for trade data are available in Bown (2020). Other hypotheses relate to the establishment of estimates for 15 different product categories, as the agreement provides only aggregate targets for the four sectors of manufacturing, agriculture, energy and services. The aim is to allocate product-level targets on the basis of the share of this product in all U.S. exports to China in 2017 of products covered by purchase obligations. See also the table below. 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. Q4: What is the scope of the implementation 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. At the same time, China imported more pork to cope with local shortages caused by the epidemic, resulting in U.S. pork exports exceeding their 2020 target (see Chart 3). In September, Chinese pork imports from the rest of the world also increased by more than 400% compared to 2017. And in one of the few parts of the first phase agreement, which includes political commitments (Chapter 3), China has agreed to remove technical barriers that had slowed pork imports. A3: The commitments made under the „Macroeconomic Policies and Exchange Rate Issues“ chapter of the first phase of the agreement do not go beyond what has already been agreed in the G20, in particular to avoid competitive devaluation and the direction of exchange rates for competitive purposes; and the International Monetary Fund (IMF), in particular to avoid exchange rate manipulation. Indeed, the transparency obligations under the agreement explicitly acknowledge the absence of new commitments, indicating that the United States and China continue to „publicly“ disclose international reserves and balance of payments data. What is new is the possible dilution of the Department of Finance`s role in dispute resolution, which will focus on the bilateral dispute assessment and settlement agreement under the USTR.

UsTR, on the other hand, can consult with other agencies, but there is no obligation, which places the Ministry of Finance in a secondary role in macroeconomic and exchange rate issues. (On this point, it should be noted that the agreement has confirmed the autonomy of monetary policy for both the United States and China; and that each party may request IMF participation.) Another aspect of the agreement is the tension between exchange rate flexibility – long the objective of the US exchange rate commitment with China – and exchange rate stability. This tension probably reflects U.S. concerns that market forces could weaken the Chinese renminbi against the dollar, a sentiment reflected in the Treasury`s latest currency report, which, while removing China`s name as a currency manipulator in August 2019, raised concerns about the „continued strength of