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United States and China Sign Phase One Agreement

On Wednesday, January 15, 2020, the United States and China signed a phase one trade agreement which will open Chinese markets and increase sales of U.S. goods and services to China.  The largest portion of the agreement focuses on Chinese purchases.  China has agreed to buy at least $200 billion more in goods and services than it did in 2017 as follows:

  • Agriculture: $40 – $45 billion in both 2020 and 2021 (food, agriculture, seafood products)
  • Manufacturing: $120 billion in 2020 and $131.9 billion in 2021 (aircraft, chemical products, electrical equipment, industrial machinery, iron/steel, medical instruments, pharmaceutical products, vehicles)
  • Energy Products: $30.1 billion in 2020 and $45.5 billion in 2021 (liquified natural gas, crude oil, coal)
  • Services: $99.9 billion in 2020 and $112.2 billion in 2021 (financial, insurance, cloud, travel)

As a condition of signing the deal, the U.S. agreed to suspend list 4B tariffs and roll back list 4A tariffs to 7.5%. U.S. officials have indicated that a formal notice will be published in the upcoming days regarding the rollback of duties for list 4B products.  A 25% tariff remains on List 1, 2 and 3 goods.  China will also maintain its retaliatory tariffs against the U.S.

The eight-part agreement largely focused on U.S. concerns regarding intellectual property (IP) and technology transfer, but went on to also address agriculture, financial services, currency, expanding trade and dispute resolution.  While the agreement did not require China to change any laws, it did require very specific enforceable pledges to protect IP and prevent technology transfer.  China agreed to strengthen protections of trade secrets and to assess criminal penalties for “willful trade secret misappropriation.”  Both countries agreed that “neither party shall require or pressure persons” to transfer technology in order to do business or get regulatory approvals.  The provisions of the agreement are subject to an enforcement mechanism that calls for several rounds of consultations.  If an agreement cannot be reached, the complaining party could reimpose tariffs.  The other party cannot retaliate as long as the tariffs are proportionate and in good faith.

China is also making regulatory changes, including changes to quotas, covering a number of agricultural products including poultry, beef, pork, dairy, pet food, rice, wheat and corn.  These changes will further increase market access for U.S. farmers and businesses.

For additional information, contact your Noatum Logistics (formerly MIQ Logistics) representative.