US-China trade deal: White House unveils details of mechanism for forestalling tariff war

The container port in Qingdao in eastern China's Shandong province, on Jan 14, 2020.
The container port in Qingdao in eastern China's Shandong province, on Jan 14, 2020.PHOTO: AP

WASHINGTON - A United States-China trade deal signed on Wednesday (Jan 15) includes a dispute resolution process aimed at deterring retaliatory tariffs against enforcement action and forestalling tit-for-tat escalations of the trade war, a senior administration official told reporters after the signing ceremony.

The official, who spoke on Wednesday (Jan 15) in a briefing call on background, said the agreement - that would see China buying an additional US$200 billion (S$269 billion) worth of US goods and services over the next two years - had a robust dispute resolution mechanism with specific time-frames for bringing a complaint and escalating an unresolved dispute to the next level of officials.

"If it can't be resolved at that point, the complaining party has the ability to take proportionate action, and as long as that action is in good faith, the other side will not be able to take countermeasures or challenge that action at the World Trade Organisation or any international forum," he said.

This means that if one side imposes punitive tariffs in response to the trade deal being violated, the other side will not be able to retaliate with counter-tariffs or lodge a complaint at international trade forums about the tariffs.

"If the party alleged to have violated the agreement thinks that the action taken was in bad faith, the only remedy is to get out of the agreement," he added.

"This was designed to prevent escalation of disputes," he said. However, if one side chooses to exit the trade deal, it is still free to impose counter-tariffs, he added.

The dispute resolution process would take roughly 90 days from start to finish, he said. This comprises a 75-day period from the start of the appeal until resolution at the US Trade Representative or Chinese vice-premier level, and another 10 to 15 days for punitive tariffs to be imposed.

The official said China's commitments were fully enforceable, and that the US would be actively monitoring Chinese import data and its own export data to ensure that China was meeting its targets.

The trade agreement also included details on how the US and China would communicate regularly and consult each other on a range of issues. A trade framework group would meet every six months, for instance, while each side's dispute resolution officials would meet at least once a month.

 
 
 
 

Said Peterson Institute for International Economics trade economist Chad Bown in a call with reporters: "What's new for the Trump administration is the commitment to have an ongoing dialogue over specific points that could prevent escalation and further worsening of trade relations between the two countries."

But the US-China dispute resolution process was very different from the enforcement of any other trade agreement the US was in, he added.

"It doesn't go to some third-party arbitrator to determine what is right," he said.

China will also embark on structural changes relating to intellectual property protection, forced technology transfers, agriculture, financial services and currency manipulation, as outlined in the eight-chapter trade accord which spanned 96 pages.