US, China reaffirm commitment to phase one trade deal

Chinese purchases of US goods still lagging, but news of dialogue lifts financial markets

The telephone call yesterday between (from top) US Trade Representative Robert Lighthizer, US Treasury Secretary Steve Mnuchin and Chinese Vice-Premier Liu He was their first formal dialogue since early May on the phase one trade deal between the Uni
The telephone call yesterday between (from left) US Trade Representative Robert Lighthizer, US Treasury Secretary Steve Mnuchin and Chinese Vice-Premier Liu He was their first formal dialogue since early May on the phase one trade deal between the United States and China. The call had been postponed from Aug 15 amid worsening US-China ties.

WASHINGTON/BEIJING • Top US and Chinese trade officials have reaffirmed their commitment to their phase one trade deal, which has seen China lagging on its obligations to buy American goods, giving a boost to financial markets yesterday.

The pledge was made in a telephone call between US Trade Representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice-Premier Liu He - their first formal dialogue since early May - amid concern the deal could be on shaky ground because of worsening United States-China ties.

"Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement," the office of the US Trade Representative (USTR) said in a statement after what it described as a regularly scheduled call.

The call was originally expected on Aug 15, six months after the trade deal was launched.

But President Donald Trump, who has frequently expressed anger at China over the handling of the coronavirus pandemic, said last week he had postponed talks with China because "I don't want to deal with them now".

Washington and Beijing have traded sanctions and barbs over a growing list of issues, including China's new national security law imposed on Hong Kong, and US accusations of national security threats posed by Chinese technology companies.

China's commerce ministry confirmed that the two sides had a constructive dialogue and agreed to continue pushing forward the implementation of the phase one trade deal.

The USTR said they "addressed steps that China has taken to effectuate structural changes" on issues that include protecting intellectual property rights, removing impediments for US companies in the financial services and agriculture sectors, and eliminating forced technology transfers.

"The parties also discussed the significant increases in purchases of US products by China as well as future actions needed to implement the agreement," it said.

News of the call helped lift global stocks and Asian currencies.

"US-China talks are bullish for most commodities as Mr Trump is desperate for good news to help in the election," said Mr Ole Houe, director of advisory services at agriculture brokerage Ikon Commodities in Sydney. "It could lead to higher demand for US products."

Chinese purchases of US goods are running well behind the pace needed to meet a first-year increase of US$77 billion (S$105 billion) specified in the deal, according to official data.

While China has recently ramped up buying of farm goods, including soya beans, it is far from meeting its commitment to buy US$36.5 billion worth of US agricultural goods under the deal - purchases that Mr Trump has counted on to bolster his support in farm states that backed him in the 2016 election.

The United States exported just US$7.27 billion in agricultural goods to China in the first half of the year, according to the US Census Bureau.

While China has recently ramped up buying of farm goods... it is far from meeting its commitment to buy US$36.5 billion (S$50 billion) worth of US agricultural goods under the deal - purchases that President Donald Trump has counted on to bolster his support in farm states that backed him in the 2016 election.

The US comments "showed that they think we are going to keep buying from the US, at least before the election takes place. And we will", an agricultural goods trader with a Chinese state-owned company told Reuters, declining to be identified as he is not authorised to speak to the media.

"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."

Mr Sushant Gupta, research director at Wood Mackenzie consultancy, expects China to import more American liquefied petroleum gas, propane and ethane in the second half of this year to meet petrochemical feedstock shortages, but does not expect it to be able to increase US crude imports enough to meet the phase one targets.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 26, 2020, with the headline 'US, China reaffirm commitment to phase one trade deal'. Print Edition | Subscribe