The phase one of US-China trade deal was signed by the U.S. President Donald Trump and Chinese Vice-Premier Liu He recently.
What does the deal mean?
The pact was pushed by Mr. Trump as a step toward creating a fairer and reciprocal partnership.
But still it leaves intact nearly 3/4th of punitive tariffs slapped on China since the onset of the trade rift in 2017.
This deal is seen as a temporary truce that leaves the key issues of the trade dispute unresolved.
Even so, the limited terms the two largest economies agreed upon sets the political stage for further bilateral negotiations and to stem a further deterioration in the global growth scenario.
What would China do?
China is to buy $200-billion in goods and services in the coming two years - purchases in 2017, were valued at some $187-billion.
The proposed increase in exports is believed to be unprecedented in U.S. trade history and caused speculation on the impact these steep targets could have on China’s other trading partners.
Agricultural exports form the smallest proportion of the latest offers relative to manufactured goods and services.
This has been an important area of concern for the American farming sector ever since China imposed retaliatory tariffs on soya bean imports from the U.S.
Beijing has promised to open its markets in dairy products, poultry, fish and allied sectors.
China has given assurances to remove barriers for American banking, insurance and other financial services.
What would the US do?
The US would be more wary of guarantees on IP protection and alleged forced technology transfers.
These two have been among the more contentious aspects of the trade dispute, as seen in the attacks on Chinese telecom manufacturer Huawei.
Separately, Washington has invoked provisions on threats to its national security to punish adversaries, an exceptional measure in the international trading arena.
Crucially, the timing of the package enables Mr. Trump to claim some success in narrowing the trade deficit with China ahead of his re-election bid.
What is next?
Mr. Trump has said that negotiations on a phase two agreements would begin immediately.
However, questions over government control of China’s state-owned firms and industrial subsidies are not expected to be resolved until after the 2020 U.S. Presidential elections.
In parallel is the agreement to revive an Obama-era mechanism for economic dialogue that was abandoned under the Trump administration.
The step signals hope just as Washington’s decision to withdraw the tag of a currency manipulator upon Beijing, accusing it of artificially devaluing the Renminbi to gain competitive advantage.
The new forum could set the tone to address sensitive issues that have dogged Beijing’s relations with the U.S. and its allies after China joined the WTO.
