The Most Important Things Not Covered In US-China Phase One Trade Deal

While the recently signed phase one trade agreement between the United States and China brought relief to businesses and markets, it was also marked by the fact that the easier aspects of the difficult trade relationship of the two countries were only covered in the deal.

Analysts have said that the two largest economies of the world are yet to start negotiating on the biggest hurdles which could be difficult to resolve in the second phase agreement. It is expected that it should remove all of the tariffs.

So what was not included in the phase one agreement?

The major issue that the two sides will now have to agree on is on industrial subsidies by China and the ‘Made in China 2025’ program of Beijing.

According to Paul Triolo of the Eurasia Group, the phase one deal does not touch upon the ambitious ‘Made in China 2025’ programme  – one that was created to propel Chinese companies to excel and transform into world leaders in a host of new emerging technologies. The phase one deal also does not include the tussle between the two countries over the subsidies given to its state-owned enterprises in China by the Chinese government.

The “Made in China 2025” is considered to be a direct challenge to the “Made in China 2025” of the United States according to Washington. The Trump administration has alleged that the practice of unfairly granting of outsized assistance from the Chinese government in the form of subsidies is the only reason that Chinese companies are now at par with American companies – and have surpassed them on certain occasions.

And along with “market access in sectors such as cloud services, cyber security and data governance issues”, Triolo says that these issues are amongst the most thorny among the two countries.

Huawei and its ban by the US is another sticking point not touched in the phase one deal.

No there was no relief for Huawie from the constant US pressure in the phase one deal even though the Chinese tech giant has been caught in the crosshairs of the trade war.

The US Treasury Secretary Steve Mnuchin has however denied such concepts and said that the Chinese firm is not a “chess piece” in the trade negotiations.

Beijing has been very critical of the way Huawei has been treated by Washington and how the future of the company was linked to the success or failure of the trade negotiations between the two countries.

Access for foreign financial services firms to the Chinese market is another contentious issue left unresolved in the phase one deal. Even though wordings of the deal do mention that China would open up its financial markets to foreign companies, it stops well short of creating a mechanism to allow a level playing field in terms of market access.

Another issue, according to Derek Scissors of the American Enterprise Institute, not clarified in the phase one deal was the “how the US is going to monitor enforcement” of the pledges made by China even though it has a dispute resolution mechanism in place.

(Adapted from BBC.com)



Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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