Senior U.S., Chinese Officials Say They Are Committed to Phase-One Trade Deal

Source: By Bob Davis and Lingling Wei, Wall Street Journal • Posted: Tuesday, August 25, 2020

Talks nod to rising tensions between the nations, as President Trump regularly criticizes Beijing

U.S. Trade Representative Robert Lighthizer, center, spoke with Chinese Vice Premier Liu He, right, while U.S. Treasury Secretary Steven Mnuchin looked on in Shanghai last year. Photo: Ng Han Guan/Associated Press

WASHINGTON—Senior U.S. and Chinese officials said they were committed to carrying out the phase-one trade accord between the two nations, the two governments said, after the two sides discussed the pact Monday evening U.S. time.

The videoconference brought together U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He for a formal review of the trade deal signed in January. The trade representative’s office released a one-paragraph summary of the talks, which it said included discussions of “significant increases” in the purchases of U.S. products by China.

Talks also reviewed steps Beijing had taken to protect American intellectual property and liberalize China’s market for financial services, according to the statement. “Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement,” it said.

But the USTR statement made no mention of any subjects that China planned to bring up. Those included concerns over the intensifying U.S. actions against Chinese technology firms. In recent days, the Trump administration has threatened bans on the TikTok app owned by Chinese internet company ByteDance Ltd. and Tencent Holdings Ltd. ’s WeChat.

A statement published by China’s official Xinhua News Agency said the two sides had “a constructive dialogue on strengthening bilateral coordination of macroeconomic policies and the implementation of the phase-one trade agreement.”

In a nod to the intensifying tensions between the two world powers, the statement published by Xinhua also said that “both sides agreed to create conditions and atmosphere to continue to promote the implementation” of the trade pact. For Beijing, that means Washington should refrain from pushing too hard on sovereignty issues such as those involving Hong Kong and Taiwan.

The main significance of the talks is that they occurred at all, said trade experts, given the deepening divides between the two nations. While Washington and Beijing fought for two years over trade issues, the phase-one deal represents one of the few strands holding the relationship together.

“The phase-one deal has become this shiny spot in a diminishing relationship,” said Kelly Ann Shaw, a former Trump White House trade official.

The release also came shortly before the beginning of televised coverage of the Republican National Convention, which is expected to feature attacks on Beijing for a host of Trump administration grievances ranging from trade to China’s handling of the coronavirus pandemic.

Markets have focused on the health of the phase-one accord as a measure of the sturdiness of the U.S.-China relationship. The videoconference was initially expected to occur around Aug. 15, but was delayed while the two sides decided on an appropriate time. For markets, the talks could provide a measure of relief.

“Markets might be getting itchy,” said Christopher Johnson, a China expert at the Center for Strategic and International Studies. “Why not have [senior officials] interact when the convention opens and get a market bounce?”

In the past few months, China has stepped up its buying of U.S. corn, soybeans and other farm products. However, the pace of the purchases, as measured in dollar terms, is falling short of what is needed to meet the targets, partly reflecting declining commodity prices amid the global pandemic.

As of June, China’s purchases of all products covered by the trade pact were $33.3 billion, only at around 47% of their year-to-date targets, according to Chad Bown, a senior fellow and trade expert at the Peterson Institute for International Economics.

Chinese negotiators had planned to seek adjustments to the agreement to take into account the price fluctuations.

Despite the optimism of the USTR account, there is deep uncertainty about whether the phase-one accord will survive the presidential election. President Trump has regularly expressed his unhappiness with Beijing and, trade experts said, could decide to scrap the accord as a way to reinforce his campaign message that he is tough on China.

In an interview on Fox News on Sunday, Mr. Trump raised the prospect of “decoupling” from China—a term used to denote largely divorcing the U.S. economy from China’s. “Well, it’s something that if they don’t treat us right I would certainly, I would certainly do that,” he said.

A recent U.S. business survey showed increasing pressure on U.S. business from China to hand over technology.

According to the survey, conducted by the U.S.-China Business Council in May and June, 13% of the more than 100 respondent companies said they had been asked to transfer technology this year, compared with only 5% last year.

China has taken some steps to address the U.S.’s concerns over forced technology transfer, the council says, such as committing not to require or pressure foreign companies to transfer technology in the phase-one agreement and through language in a new foreign-investment law. “However, without specifics, it is unclear how this will reasonably be enforced,” it says in a report released earlier this month.

Write to Bob Davis at bob.davis@wsj.com and Lingling Wei at lingling.wei@wsj.com

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