Trans-Pacific View | Diplomacy | Economy | East Asia

White House Touts ‘Very Significant’ Phase One China Trade Deal

A White House press call includes some more details on the agreement that was announced December 13.

Bonnie Girard
White House Touts ‘Very Significant’ Phase One China Trade Deal
Credit: Official White House photo by Shealah Craighead

The White House has released the text of a background press call with “senior administration officials” providing some more details on the U.S.-China “phase one” trade agreement. The call, made on December 12, was released in text form on December 15.

The call included Larry Kudlow, director of the National Economic Council at the White House, as well as another, unnamed, senior administration official, who was “the person that was involved in the details and the heavy lifting, all through this whole process.”

Calling the Phase One deal “a very important first step in solving our trade relations and balance[ing] with China,” Kudlow also said that President Donald Trump had weighed in that morning, saying the deal “represents an opening of China.”

The Phase One deal “goes into effect almost immediately,” Kudlow noted.

Ambassador Robert Lighthizer is expected to sign the agreement with Vice Premier Liu He in a few weeks.

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Confirming details reported in The Diplomat on December 14, Kudlow began the call by saying that ”some tariff adjustments, schedules of Chinese purchases of American goods and services, financial service reform, currency reform, intellectual property rights reform, forced transfer of technology reform” are covered in the agreement.

In fact, “all of the key chapters have been covered in this deal.”

The unnamed senior administration official concurred, and went further: “…These are commitments that are very significant and address issues in a way that have never been addressed before. They’re all enforceable. There’s a very strong, effective enforcement mechanism.”

Still, though, the White House made clear that “there will be tariffs remaining in effect at 25 percent on $250 billion worth of Chinese imports, as well as 7.5 percent on an additional roughly $120 billion worth of Chinese exports.”

Asked to spell out the progress made on what many would consider to be one of the most important and yet thorniest issues in dispute between the United States and China, intellectual property (IP) protections, the administration official said that there are “very specific, substantive, important commitments that China is making in all of the key areas of intellectual property.”

These areas include “trade secrets, pharmaceutical-related intellectual property patents, the issue of geographical indications, as well as protections on trademarks and enforcement against pirated and counterfeit goods, as well as… online infringement.”

Adding that China has agreed to make “changes” in its IP enforcement procedures, the administration says that a strong mechanism to deal with noncompliance is also written into the agreement, but few details were given.

It should be noted that the list mentioned in the call did not include high-tech IP in telecommunications, electronics, software, or nonpharmaceutical patents.

Additional detail, however, will be forthcoming when the text of the agreement is released to the public. The agreement will be available “eventually,” after going through administrative processes, the official said. No date was given.

Another major aspect of the Phase One deal was an agreement for China to increase imports from the United States. The White House press call provided some more details on that front, saying “we have a specific commitment from China” on four categories of purchases. He went on to say that the four purchase categories will include “specific subcategories” as well.

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China has agreed to purchase “at least $200 billion” over the next two years in manufactured goods, agricultural goods, energy products, and services. That includes “commitments to purchase” $40 to 50 billion worth of agricultural goods over that period.

The agricultural commitments are not just limited to purchases, according to the administration official. Non-tariff barriers are addressed, as well.

The Chinese have made commitments on, presumably to lift, “a multitude of non-tariff barriers to U.S. agriculture.”

These include meat, poultry, seafood, rice, dairy, infant formula, horticulture products, animal feed, feed additives, and pet food, the official said.

The agreement also includes provisions on the “critically important issue of ag biotech as well.”

One journalist on the call suggested that American farmers, hurt by tariffs on their products going into China, ironically may now face a situation in which they are not able to produce enough product for China to reach the $40 to $50 billion purchase mark per year.

The administration said that had been dealt with. “…We of course worked closely with USDA and others on those issues in doing the analysis, and with our stakeholders. And we are very comfortable that our farmers, ranchers, and growers can meet those numbers.”

When asked if additional tariffs would be threatened if China doesn’t meet the purchase thresholds in the agreement, the official did not directly answer, but said that the commitments are “enforceable.”

However, the “numbers there will be in a document that will be classified and confidential.”

The official went on to say, “if those numbers got out — you know, potential market effects or also potential disclosure of business proprietary information” could result.

“This is going to be a very much living document that’s going to be important for the economy moving forward.”

The agreement also has currency commitments “based on what we had in the USMCA.”

The United States-Mexico-Canada Agreement (USMCA) commits each nation to “avoid manipulating exchange rates,” “maintain a market-determined exchange rate regime,” and “refrain from competitive devaluation.”

Stating that the agreement “really does go to our future competitiveness on all these areas,” the senior administration official also emphasized that “for the first time” China will stop “forcing or pressuring” foreign companies to transfer their technology to Chinese companies as a condition for cooperation and market access.

China is also making the commitment to “refrain from directing or supporting outbound direct investments aimed at acquiring foreign technology.”

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The official stressed throughout the call that everything in the agreement is enforceable.

“This enforcement mechanism… is very specific… The procedures are specifically laid out, and timeframes are laid out. This is going to be a very prompt, effective mechanism,” the official said.

Separately, Kudlow had mentioned that discussions will continue with China, adding that “maybe Phase Two has already started.”

Asked in the call what issues would be addressed moving forward, the unnamed senior official said “we could address” data localization, cross-border data transfers, subsidies, SOE (state-owned enterprises) disciplines, and cyber intrusions, as well as “other important but difficult issues.”

“That’s why we’re…continuing to keep on the tariffs that we have.”

The official confirmed that the expectation is that the Phase One agreement would be signed in the “first week of January.”