China has purchased less than three-fifths of the US goods projected under the “phase one” trade deal that paused a tariff dispute between the two countries a year ago, posing another challenge for the administration of Joe Biden in its relations with Beijing.
Under the terms of the deal, China agreed to buy $200bn of US goods and services more than it did in 2017, before the start of the trade dispute, over a two-year period to the end of 2021.
Trade analysts have been measuring Beijing’s progress towards that goal, and the latest Chinese import data suggest they are falling far behind.
According to analysis from the Peterson Institute for International Economics, based on data to the end of last month, Beijing had purchased just 58 per cent of the US exports expected under its projections.
China’s imports of US products covered by the trade deal’s purchase commitments amounted to $100bn by the end of December, compared with a prorated target of $173.1bn, the institute said.
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The shortfall presents a challenge to the Biden administration as it decides how much of the Trump administration’s policy on China to keep in place, including whether to preserve US tariffs on billions of dollars of Chinese imports.
Chad Bown, a fellow at the Peterson Institute, said the deal was “always a political agreement”, and that the Biden team should “de-emphasise the purchase commitments”.
“You want to reward behaviour, and not necessarily encourage the Chinese state to make all of these purchases at the same time as you’re trying to say — ‘no, become more market-oriented’,” Mr Bown said.
Speaking to the Financial Times last week, Robert Lighthizer, outgoing US trade representative, said that with respect to analysing China’s fulfilment of its purchasing commitments, it was “quite unfair of people to act like Covid didn’t happen”.
Mr Lighthizer, who as Donald Trump’s top trade official oversaw US trade negotiations with Chinese officials, said the phase one deal was comprised of more than purchasing commitments. He argued that there were “an awful lot of changes” that China had made to intellectual property protections; new and clear rules that Beijing cannot force the transfer of technology from US companies to Chinese companies; and some opening up of the country’s financial services.
The agreement set out targets for broad sectors, which could be satisfied with purchases of products from aircraft to medical equipment and soyabeans to seafood and services such as tourism or cloud computing.
On purchasing commitments during 2020, some sectoral exports fared better than others. China come closest to fulfilling its agricultural purchases, and did most poorly on energy purchasing commitments.
China has bought $23.5bn of the agricultural products covered by the deal, compared to an expected first-year figure of $36.6bn.
Chinese imports of US energy products covered by the deal were just $9.8bn, however, against an implied target of $25.3bn for the year. The collapse in oil and other energy prices during the pandemic made the deal’s dollar target all but impossible to hit.
The low oil price has, however, led to a surge in crude import volumes in recent months as China stockpiled supply while prices were depressed.
Its crude imports from the US averaged about 1m barrels a day from May to September, around three times the same period last year, according to US government data — but analysts question whether China will keep up this pace of buying as prices recover.
The first phase of the trade deal did not address some of the biggest sources of tension between the two countries, including commercial cybertheft in China and Beijing’s use of industrial subsidies.
Phase two talks never occurred under the Trump administration, however, as the US-China relationship soured further.
Mr Biden has said he would aim to work with Europe to further pressure Beijing on trade issues, ending the Trump administration’s strategy of negotiating alone, and his incoming officials have so far indicated that they consider it a key priority.
In her maiden speech earlier this month, Katherine Tai, incoming United States Trade Representative, said that “stiffening competition from a growing and ambitious China” would be one of the top issues in her trade brief. Janet Yellen, incoming Treasury secretary, also told Congress this week that the administration would look to swiftly deal with any economic misbehaviour from China.
Source: Economy - ft.com
