Trade war hurdle passed

A key hurdle in the trade negotiations between the US and China has been passed. Top Trump negotiators have said that they have agreed on a trade enforcement process between the two countries.

Background

The U.S.–China Strategic and Economic Dialogue were created in 2009. Every year, high-level representatives from both nations open up dialogue to improve economic partnership. In 2017, the meetings that occurred were reported as being “tense”. Upon conclusion, the two countries cancelled a joint press conference and did not release a statement. They also did not release a plan of action.

US President Donald Trump has previously been a critic of China. He blamed the country for loss of jobs within the US and has often criticised the US trade deficit with China. China's trade surplus with the United States widened in 2017 while total foreign trade volume maintained rapid growth.

The US and China have engaged in a series of bilateral, ministerial-level talks to de-escalate the trade war which has led to the temporary freezing of all new tariffs on both imports and exports until March 1, 2019.

Analysis

After extended discussions between Chinese and US negotiators, the two countries have agreed on establishing a trade enforcement process.

According to Financial Times, the top US trade officials has informed the House of Representative that Beijing had conceded to a trade enforcement process. This process would allow US officials to monitor whether China was adhering to the trade agreement.

Robert Lighthizer, the US trade representative, told Congress that Chinese officials have also agreed to regular meetings among senior officials at different levels to discuss US complaints. He added that even after that, if there is no satisfactory outcome, Washington could proceed with “unilateral” but “proportional” punitive action. 

President Trump, speaking to US governors said: “China has been terrific. We want to make a deal that’s great for both countries and that’s really what we’re going to be doing.” He took to Twitter and expressed: "I am pleased to report that the US has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues."

Mr. Lighthizer also while speaking to the ways and means committee of the House of Representatives said that “real progress” was made in the talks. However, he also said: “Let me be clear: much still needs to be done both before an agreement is reached and, more importantly, after it is reached, if one is reached.”

US officials had earlier said that talks would extend into the weekend after negotiators produced a deal on currency. 

The two sides have been negotiating an enforcement mechanism. Washington wants a reliable mechanism to ensure that Chinese reform commitments were followed through to completion, while Beijing insisted on what it called a “fair and objective” process.

A possible trade deal would be achieved or finalised only when Mr. Trump and his counterpart meet. Though no official date has been set, the meeting between the two leaders is expected to happen soon. Democrats on Capitol Hill, in particular, have warned the Trump administration not to settle for a weak deal.

Assessment  

Our assessment is that the trade negotiations under the present context are likely to produce outcomes that both countries would deem satisfactory. 

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