China and the U.S. might sign trade agreement on January 15
January 7, 2020 Category Foreign trade, Weekly
U.S. President Donald Trump said he will sign the first phase of the U.S.-China trade deal with Chinese Vice Premier Liu He at the White House on January 15. He added that he might travel to China for further talks at a later date. This has however not been confirmed. The Chinese delegation had originally planned to set off earlier in the month but had to change their travel schedule after Donald Trump sent a tweet on New Year’s Eve claiming that he would sign the deal with “high representatives” from Beijing on January 15 in Washington. The text of the agreement has not yet been made public pending legal review and translation.
On December 13, China and the U.S. agreed on the text of a phase one economic and trade agreement, including intellectual property rights, technology transfer, food and agricultural products, financial services and so on. Included in the deal is a Chinese commitment to import an extra USD200 billion of American goods and services over two years, effectively doubling China’s imports from the United States, which were around USD188 billion in 2017 before tariffs decimated shipments.
But this would substitute the imports of other nations and thereby upset other trading partners and potentially violating World Trade Organization (WTO) regulations. “Any number is possible if you try really hard, the problem is how many other countries do you want to make unhappy?”, said Alicia Garcia Herrero, Chief Asia-Pacific Economist at Natixis. A big portion of the increased Chinese imports would be agricultural products. Centro Insper Agro Global, a São Paulo-based research institute, said that Brazil could lose USD10 billion – some 28% – of its agricultural exports to China as a result of the phase one deal and the boost to U.S. soybeans. One quarter of New Zealand’s agricultural shipments are now bound for China. Dairy and meat were among New Zealand’s top three exports to China in 2018 – sectors the U.S. will now be eyeing.
The U.S. government is weighing new limits on sales of chips and other vital components to Huawei, sparking another round of lobbying by technology companies. Industry associations representing U.S. chip makers, software companies and manufacturers have written to Secretary of Commerce Wilbur Ross in recent weeks arguing against the changes. They urge President Donald Trump’s administration to at least hear them out before introducing tougher rules to close loopholes letting American companies keep working with Huawei. The tech companies argue that a tougher Huawei ban only harms the U.S.: many of the components they supply to Huawei can be obtained elsewhere, so U.S. companies would lose sales to overseas rivals. A Pew Research Center report in August said U.S. views on China turned sharply negative amid trade tensions. “Today, 60% of Americans have an unfavorable opinion of China, up from 47% in 2018 – the highest level since the Pew Research Center began asking the question.”
Czech Prime Minister Andrej Babis has sacked the country’s cybersecurity chief Dusan Navratil over alleged threats posed by Chinese firms Huawei and ZTE. Navratil became the first Director of the National Cyber and Information Security Agency in 2017 after serving as head of the National Security Authority for 10 years. Babis ordered government agencies to stop using Huawei mobile phones in December. In April, when he met Huawei Founder Ren Zhengfei on a visit to China, Czech President Milos Zeman said allegations against Huawei were “not supported by evidence”. Navratil was consistently opposed to Huawei, and the Czech President and Prime Minister are both essentially pro-China.
President Trump is again using national security as a pretext to attack another Chinese company, DJI, the world’s biggest manufacturer of small commercial drones with about 75% of global market share. Lawmakers have introduced more than 20 pieces of drone-related legislation in recent months, targeting Chinese makers in general and DJI in particular. The bills aim to regulate or restrict the availability of DJI’s products and give advantage to local firms. The Trump administration has blacklisted more than 140 Chinese companies.
The Global Times commented that “most Chinese analysts agree that regardless of who wins in the U.S. elections, there is no chance for China-U.S. ties to return to the pre-2019 situation, as China’s growing influence and comprehensive development, as well as its will to reform and influence globalization and the world order, are making the U.S. nervous, and at the same time there is no reason for China to give up its development.”
China has cut the weighting of the U.S. dollar in a basket of foreign currencies used to determine the strength of the yuan, helping Beijing’s long-term efforts to weaken the international dominance of the American currency, economists said. The China Foreign Exchange Trade System (CFETS) trimmed the weighting of the U.S. dollar to 21.59% from 22.40% in the basket to make it “more representative” of current trade conditions. The new version of the index will be based on 2018 trade data, rather than data from 2015, when the CFETS was first established.
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