So, with this data in the background, what should we do with the Phase One agreement? The authors of last summer`s blog argued that because the U.S. was operating so far from its growth potential due to the pandemic, an exogenous increase in demand from China would likely have a greater impact than most economists expected when the deal was signed. Under Phase One Agreement, the United States and China agreed on an innovative approach to enforcing their agreement, as outlined in Chapter Seven. The first phase of the agreement established a trade framework group to discuss the implementation of the agreement, headed by the U.S. Trade Representative and a designated vice premier of the People`s Republic of China, as well as a bilateral office for assessment and dispute settlement for each party. As in a typical trade agreement, a complaining party may appeal to the other party`s bilateral assessment and dispute settlement office if there is a problem with the agreement. If this issue is not resolved, it may be addressed to the Designated U.S. Deputy Trade Representative and the Designated Assistant Secretary. U.S.
exports of goods to China fell sharply during the trade conflict, eventually falling by 35 percent in February last year, but have since recovered sharply. From this low point, exports to China had increased by nearly 70% in June. So is China meeting its purchasing targets? As suggested in the following table, the short answer is no. Although the agreement also sets targets for China`s purchases of certain services traded in the United States, this data is not reported monthly and is not covered here. The agreement also includes targets for 2021, which are not presented here. The first phase of the trade agreement, signed in January 2020, included specific targets for China`s purchases of agricultural, industrial goods, energy and services exports from the United States (these were set out in Chapter 6 and Annex 6.1 of the agreement). These commitments were extremely ambitious: the agreement set numerical targets to increase U.S. exports of goods and services to China, compared to a baseline of $77 billion in 2020 and $123 billion in 2021. The target for 2021 was 82% above the baseline in 2017 and about twice as high as in 2019 shortly before the agreement was signed. In Article 7.4, Phase One Agreement provides that if the complaining party`s concerns are not addressed by the United States.
The United States and China have reached a historic and enforceable agreement on a Phase One trade agreement that requires structural reforms and other changes to China`s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, currency and currency. The Phase One agreement also includes China`s commitment to make significant additional purchases of U.S. goods and services in the coming years. It is important that the agreement introduces a robust dispute settlement system that ensures swift and effective implementation and enforcement. The United States has agreed to substantially amend its tariff measures under Article 301. Moreover, from a geopolitical perspective, there are few, if any, other places to force China to meet its trade commitments. The World Trade Organization (WTO) is in bad shape, particularly its Appellate Body, the ”crown jewel” of the organization responsible for having the final say in trade disputes. Even if the WTO were fully operational, there are doubts as to whether phase one agreement can be considered legitimate under WTO rules.
The WTO Agreement on Safeguards provides that the Agriculture Chapter addresses structural barriers to trade and will support a dramatic expansion of U.S. food, agricultural and seafood exports, increase U.S. farm and fisheries incomes, generate more rural economic activity, and promote job growth. Various non-tariff barriers to U.S. agricultural and seafood trade are being eliminated, including meat, poultry, seafood, rice, dairy, infant formula, horticultural products, animal feed and food additives, pet food, and agricultural biotechnology products. ==References=====External links===Economic conditions have changed dramatically over the past year, suggesting that the growth multiplier of China`s increase in demand may be much weaker than suggested in the previous Liberty Street article. The ”multiplier” refers to the additional amount that GDP can increase in response to an initial increase in demand, including secondary responses on both the supply and demand sides of the economy. Theoretical and empirical evidence suggests that multipliers in recessions (about 1.5 to 2.0) may be significantly greater than in expansions (less than 0.5).
In comparison, the additional demand implied by China`s commitments to buy goods and services in 2021 amounted to 0.6% of US GDP. For U.S. goods exports, the deal is expected to cover products that accounted for $95.1 billion, or 73 percent of total U.S. goods exports to China ($129.8 billion) in 2017. Of the total exports of products covered in 2017, exports worth $20.9 billion were made by agriculture, $66.5 billion by manufacturing and $7.6 billion by energy. Products discovered by the deal — and therefore have no targets for 2020 — accounted for 27 percent ($34.7 billion) of total U.S. goods exports to China in 2017. The agreement in the first phase covered a number of substantive issues in Chapters 1 to 5 that deserve more attention than the procurement targets in Chapter 6. These included improving IP protection and technology transfer; the elimination of non-tariff barriers and other unfair trading practices in agriculture and financial services; and more flexibility and transparency in China`s exchange rate system, all with the aim of levelling the playing field between China and its trading partners. The concerns expressed in these chapters are given to the important and arguably growing role of the Chinese government in owning and controlling the country`s economy and financial system (e.B.
as set out in the recent 14th Five-Year Plan). In this context, the US economy could reap important long-term benefits from the strict implementation of the commitments made under the first five chapters of the agreement. Aside from the political rhetoric, opening the Phase One agreement to readjustments and negotiations seems to be the most plausible option in the short term. The agreement was a success, despite the figures and shortcomings in the text of the agreement. No country should be forced to import from another country, but China was willing to import from the United States in increased quantities. This is the novelty of the Phase One agreement: it allows any party – in practice, most likely the United States – to respond unilaterally to an alleged breach of the agreement by suspending an obligation or taking a remedy in a ”proportionate” manner. This response is intended to ”prevent the escalation of the situation and maintain normal bilateral trade relations”, and the party against whom an appeal is made must not retaliate in return as long as the measure ”has been taken in good faith”. a Member shall not seek, adopt or maintain voluntary export restrictions, provisions for orderly marketing or other similar measures on the export or import side. .
