Don’t overreact to China-US first-phase trade agreement

First, the two countries postponed plans to further increase tariffs on each other on December 15;

Second, the United States agreed to withdraw some of the tariffs that have been imposed after the agreement was signed. The 15% tariff on Chinese products covering US $ 150 billion will be withdrawn to 7.5%, and China will also withdraw the equivalent tariff. The two countries will continue to withdraw the imposed tariffs in the follow-up negotiations;

Third, based on the purchase of USD 24 billion of agricultural products in 2017, China will increase purchases of approximately USD 16 billion each year for the next 2 years, and will also purchase energy, manufactured goods, and service American goods;

Fourth, the two countries will further expand the scope of merchandise exemption for the parts still subject to tariffs.

Next, the two countries will “complete the necessary legal procedures, translation checks and other necessary procedures, and then agree on the time, place and form to sign this agreement.” According to US Trade Negotiator Robert Lighthizer on the 13th, the two countries will officially sign in January 2020.

As a matter of fact, the current situation had obvious signs during November. The Chinese leader Liu He and the US leader Lighthizer and Steven Mnuchin talked for three times during the high-level consultations on China-US trade and economic cooperation. Compared with the vague and changeable wording of the US side, the official Chinese draft has always been rigorous, and the wording differences have clearly revealed the more promising progress of the negotiations.

On November 2, “the two sides had a serious and constructive discussion on the proper resolution of their core concerns, and reached a consensus in principle. The two sides discussed the next step of the negotiation arrangements”; on November 16, “the two parties have The core concerns had a constructive discussion and will continue to maintain close exchanges. “On November 26,” the two sides reached a consensus on the resolution of relevant issues and agreed to maintain communication on the remaining matters in the first phase of agreement negotiations. “

From “getting a consensus in principle” to “constructing a discussion around their core concerns” and then “getting a consensus on resolving related issues”, we can see that the two countries’ work on the first phase of the trade agreement has reached the final stage.

China and the United States will sign the first phase of the trade agreement before Christmas in December or before the Spring Festival of the New Year (January 25, 2020). The reason for this judgment is not based on news changes, but based on the political and economic fundamentals of the two countries.

First, both the Chinese and American governments need to sign their first-phase agreement to achieve their own surface and substantive demands. Washington ’s apparent appeal is to reduce the trade deficit, and its actual appeal is for the 2020 presidential election. It continues to hype the China-US negotiations and maintain its importance as “Trump diplomatic merit”, especially considering the U.S. Congress ’s December 13 official On the day of the announcement, it is determined that the background of the presidential impeachment case will be voted in full vote next week; Beijing ’s apparent appeal is that the two countries withdraw the tariffs they have imposed, and the actual appeal is to maintain the stability of China-US relations through constant agreement and constant contact.

Secondly, both countries need to boost the confidence of their respective markets before the coming of important holidays, given the poor economic expectations of the coming year. This is a real consideration. The Chinese Communist Party just held the Central Economic Work Conference from 10th to 12th. Throughout the contents of the manuscript, we can predict that the Chinese economy will still need to bear the pressure of structural transformation and slowing global growth in 2020. Also generally look bad. At this time, if the China-US trade war continues or worsens, it will undoubtedly be an important negative factor. Stakeholders from all walks of life in both countries need some good news.

After all, market confidence is not only an economic factor, but also an important political consideration.

It should be said that the tariffs originally imposed by the U.S. government on Chinese goods on December 15th have been impossible to implement since a month ago. As for how much US agricultural products China buys, although it is important to Trump, it has been It’s not that difficult-China is willing to buy, but the problem is how much goods the United States can sell.

Therefore, the main points that have prevented the two countries from signing the first phase of the agreement have always been in two details. First, “what percentage of the two countries will withdraw the added tariffs in the first phase of the agreement, and the timetable for the future phased withdrawal of all the added tariffs”, and second, “the two countries How much China ’s financial and corporate law reform commitments are written into the phase agreement, and a specific implementation timetable. ” It now appears that the two countries have reached consensus on these two aspects.

Next, the two countries will conduct follow-up negotiations on the “Phase II Agreement”, “Phase X Agreement” and “Final Agreement”. Whether the negotiation process is smooth or not is determined by many factors, and the uncertain factors will mainly come from US politics. Including Trump’s campaign pressure, media opinion questioning “Trump failed to achieve the best results” and so on. In contrast, on the basis of meeting the needs of economic reform and national sovereignty, China will continue to actively negotiate with the United States with an attitude of “talk, the door is open; fight, and always be accompanied”.

Therefore, on the one hand, people do not need to look at the China-U.S. Trade negotiations in the declining stage. Based on the political considerations of the two countries, the first phase of the agreement will not reproduce errors and will necessarily be signed in the short term. On the other hand, we should also maintain common sense and correctly understand the essence of China-US economic and trade negotiations in 2020: in essence, this is not a trade negotiation, but a test of whether the two governments can rationally control the relations between the two countries.