appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Bashar H. Malkawi

Under the US-China phase one trade deal, Beijing agreed to make structural reforms, open its financial services and strengthen intellectual property. It also pledged to buy at least US$200 billion more in US goods and services for the two-year period through to December 31, 2021, above the 2017 baseline levels.
However, as we approach the end date, complaints have emerged that China is not meeting its obligations. It has reached only 62 per cent of the target, according to some reports.
This raises questions about compliance and enforcement. The United States and China agreed to an innovative approach as part of the agreement. Chapter 7 provides for the steps required to ensure effective implementation of the agreement.
The Trade Framework Group was created to discuss implementation of the agreement, led by the US trade representative and a designated Chinese vice-premier, with a Bilateral Evaluation and Dispute Resolution Office for each party.
As in a typical trade agreement, a complaining party can submit an appeal to the office of the other party on an issue connected to the trade deal. If it is not resolved, then the matter can go to the designated deputy US trade representative and Chinese vice-minister.


If the complaints still cannot be resolved, “the parties shall engage in expedited consultations”. But without a consensus, the complainant may “resort to taking action based on facts provided during the consultations, including by suspending an obligation under this agreement or by adopting a remedial measure in a proportionate way that it considers appropriate”.
Strikingly, the phase one trade deal permits either party to unilaterally retaliate by suspending an obligation or adopting proportionate remedial measures to prevent the situation from escalating and still maintain the normal bilateral trade relationship as long as the action was taken in good faith. The language used allows for a wide interpretation of in a “proportionate way” and “in good faith”.
Rather achieving the goals of managing trade peacefully, the dispute resolution language could lead to an escalation of US-China trade tensions. This is exacerbated by the fact that, under the deal, it is the complainant who determines whether there has been a violation. There is no independent panel or tribunal.
The phase one deal is not clear on the remedial measures that can be taken by the complaining party, whether it is the suspension of tariff or quota concessions or imposing additional tariffs and for how long these measures can be taken. Basically, a party can unilaterally determine that a violation has occurred and the duration for suspending concessions and determining the level thereof.




This leaves us with the question of whether it is expected for both parties to take unilateral measures to enforce the phase one deal. Statements made by US officials indicate this is likely to happen. However, thus far, evidence shows that enforcement might not happen for several reasons.
First, when the US takes action, China can either accept the remedial measure, along with a promise not to retaliate, or withdraw from the phase one deal. The latter option is more harmful than taking the remedial measure itself.
Second, from an economic perspective, whatever targets are achieved under the deal are better than nothing or reverting to a full-blown trade war with China.
Good sign as China and the US recognise mutual self-interest
Third, from a geopolitical perspective, there are few, if any, alternative venues to force China to abide by its trade obligations. The World Trade Organization is in bad shape, especially its Appellate Body, the “crown jewel” of the organisation that is responsible for the final say on trade disputes. Even more, there is doubt over whether the phase one deal is legitimate under WTO rules.
Clearly, measures such as bilateral voluntary export restraints, orderly marketing agreements and similar measures that limit imports of certain products are prohibited by the trade body. Putting aside the political rhetoric, opening the phase one deal to readjustment and negotiations seems the most plausible option in the short term.
The phase one deal can be considered a success, despite the numbers and flaws in the text. No country should be forced to import from another.
Nevertheless, China was willing to import goods and services from the US in increased quantities. Washington should give diplomacy and negotiations another go.
Bashar Malkawi is Global Professor of Practice in Law at the University of Arizona


Scott Kennedy on China’s ‘slow tech dragon’ and 2 more Xi-Trump meetings

Scott Kennedy on the Xi-Trump summit and US-China instability

Why Xi’s US trip leaves Europe relieved by the trade truce – but wary of what comes next

How China is seeking to transform the meaning of great power

US-China trade war

US-China phase one trade deal still has room for negotiation despite flaws

Vice-Premier Liu He (left) and then US president Donald Trump shake hands after signing phase one of the US-China trade agreement during a ceremony in the East Room of the White House in Washington on January 15, 2020. Photo: Reuters

What happens if the US-China phase one trade deal fails?

Illustration: Craig Stephens

US says China has fallen short on ‘phase one’ intellectual property commitments

US Trade Representative Katherine Tai during a hearing Wednesday before the Senate Appropriations Subcommittee. Tai said she would closely monitor how China has followed through on the commitments it made in last year’s “phase one” trade deal. Photographer: Getty Images/Bloomberg

(200115) -- WASHINGTON D.C., Jan. 15, 2020 (Xinhua) -- U.S. President Donald Trump and Chinese Vice Premier Liu He, who is also a member of the Political Bureau of the Communist Party of China Central Committee and chief of the Chinese side of the China-U.S. comprehensive economic dialogue, sign the China-U.S. phase-one economic and trade agreement during a ceremony at the East Room of the White House in Washington D.C., the United States, Jan. 15, 2020. (Xinhua/Wang Ying)

US trade chief Katherine Tai says getting ‘traction’ with China in phase one deal talks

US Trade Representative Katherine Tai speaks at an event in Washington in October. Photo: Bloomberg

China’s Boeing purchases seen as ‘weakness’ in US trade deal probe, hurt by ‘sour’ relations

Data from Ascend by Cirium showed that 113 aircraft in Boeing’s inventory of 335, defined as aircraft which have flown but not yet been delivered, are scheduled for delivery to customers in China. Photo: Seattle Aviation Images/ZUMA Wire

US Trade Representative Katherine Tai said the Biden administration is getting traction with China in talks over Beijing’s compliance with a Trump-era trade deal, but she declined to predict an outcome while discussions continue. Photo: Bloomberg

Opinion

Knowledge

US-China Relations


Questions remain around the trade deal, especially on enforcement, as China lags far behind its obligations to buy US goods and services
Putting aside the political rhetoric, opening the deal to readjustment and negotiations seems the most plausible option in the short term



Questions remain, especially on enforcement, as China lags far behind its obligations to buy US goods and services. Putting aside the political rhetoric, opening the deal to readjustment and negotiations seems the most plausible option in the short term.


US-China trade war: Opinion

World Trade Organization (WTO)

Trade

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)
