U.S., China Reassures Commitment for Phase 1 Trade Deal over a Call
Top trade officials from the U.S. and Chinese reassured their commitment to the Phase 1 trade deal. The deal in the past has witnessed China lagging on its obligations to purchase American goods, offering much-required relief to skeptical markets on Tuesday.
The pledge was taken in a phone call between U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin, and Chinese Vice Premier Liu He. It was their first formal dialogue since early May and happened amid surging concerns for the deal. It is expected that the deal could be happening on shaky ground in an increasingly confrontational bilateral relationship.
“Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement,” the U.S. Trade Representative’s office (USTR) explained in a statement after what it referred to as a “regularly scheduled call.”
Originally, the call was expected on August 15, six months following the trade deal launch. However, Trump, who has frequently expressed acrimony towards China over the coronavirus pandemic, said last week he had postponed talks with China because he didn’t want to deal with the country now.
Washington and Beijing have exchanged sanctions and barbs over a wide list of issues. This includes the new national security law inflicted on Hong Kong, China’s disputed territorial claims in the South China Sea, the COVID-19 pandemic, and U.S. accusations of national security threats posed by Chinese tech firms.
China’s commerce ministry said that the two countries had a “constructive dialogue” and agreed to be consistent in pushing forward the implementation of the Phase 1 trade deal.
The USTR stated that the two sides “addressed steps that China has taken to effectuate structural changes” on issues consisting of conserving intellectual property rights, eradicating impediments for U.S. firms in the financial services and agriculture sectors, and knock out forced technology transfers. “The parties also discussed the significant increases in purchases of U.S. products by China as well as future actions needed to implement the agreement,” it said.
Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney, said that “U.S.-China talks are bullish for most commodities as Trump is desperate for good news to help in the election.”
Houe also stated that “It could lead to higher demand for U.S. products.”
Falling Behind the Promise
According to official data, the Chinese procurement of U.S. goods is way behind the pace required to meet the first-year surge of $77 billion stated in the deal.
China has recently amped up the purchase of farm goods consisting of soybeans. The country is far away from completing its commitment to buying $36.5 billion worth of U.S. agricultural goods under the deal. Trump has counted on these purchases to strengthen his support in farm states that supported him in 2016.
According to the U.S. Census Bureau, the United States exported only $7.274 billion in agricultural goods to China in the first half of the year.
The U.S. comments “showed that they think we are going to keep buying from the U.S., at least before the election takes place. And we will,” according to an agricultural goods trader with a Chinese state-owned firm.
“We are definitely going to maintain the stance to buy as much as possible, but it is really hard to say whether the targets can be reached.”
China purchased only 5% of the targeted $25.3 billion in energy products from the United States in the first half of 2020. Chinese state-owned oil firms have booked tankers to carry a minimum of 20 million barrels of U.S. crude for August and September.