Trade Deals across the World: February Edition
From a trade deal point of view, this is going to be a very interesting year. The main players in the negotiations for these trade deals are the United States and the United Kingdom, both of which have new trade deals to negotiate with the European Union. And the United States only signed a “phase one” deal with China, which means there is much more to be agreed on there too.
The United States and China
After a long and tough negotiation, with a trade war to further complicate matters, the United States and China have finally signed an initial “Phase One” Trade Agreement. It’s a first step which will only lead to the US lifting some of its tariffs and China stepping up its spending on US farm products.
The deal commits China to do more to crack down on the theft of American technology and corporate secrets by its companies and state entities, while outlining a $200 billion spending spree to try to close its trade imbalance with the U.S. It also binds Beijing to avoiding currency manipulation to gain an advantage and includes an enforcement system to ensure promises are kept.
The administration says many of those issues will be covered in a second phase of a deal, though when those talks will begin and how long they will take remains uncertain. In the meantime, the U.S. is also set to maintain tariffs on roughly two-thirds of imports from China, something that Trump on Wednesday said was essential as leverage over the country until it agreed to further reforms.
Read the full article on Bloomberg here.
There is a lot of criticism on the deal
The teeth in the mechanism are a familiar Trump administration tool: the imposition of tariffs in proportion to damage caused by any non-compliance.
But according to the text, if the offending party disagrees with such a result, its only recourse is to quit the agreement. There are no provisions for appeal or levying retaliatory tariffs.
This means that the deal may be over before it has begun, if one of the parties gets angry at the other party.
Read more in the article by Reuters here.
There is also a lot of concern, mainly around free trade, which free trade agreements should enable.
…by requiring China to buy specific amounts of goods from the U.S., the deal is raising concerns that it moves away from a free-market arrangement to a more managed style of trade.
The EU warned this week that Europeans could bring a complaint to the World Trade Organization if the “Phase 1” deal puts them at an unfair disadvantage.
Trump’s top trade negotiator, Robert Lighthizer, said the China deal doesn’t violate WTO rules or compromise any other country’s trading rights.
Read the full article by NPR here.
At the same time, there is relief about the agreement as well.
The signing of a Phase 1 trade agreement between the United States and China will reduce – but not eliminate – uncertainty that has dampened global economic growth, International Monetary Fund Managing Director Kristalina Georgieva said on Friday.
Georgieva said the IMF had previously estimated that global trade tensions would shave 0.8%, or $700 billion, off international economic growth. Only about one-third of that was due to tariffs, with the larger share resulting from a slowdown in business investment. Since the U.S.-China trade deal was only an interim solution, the impact on investment would not be eradicated, she said.
More on what Georgieva said on this in the full article here.
You can find the full text of the U.S.-China Phase One Trade Agreement here.
The United States and Japan
The U.S.-Japan Trade Agreement (USJTA) entered into effect on January 1st.
A trade deal between the U.S. and Japan that cuts tariffs on some agricultural products and industrial goods took effect…, with little indication the two sides would meet a pledge to soon start a new round of talks broadening the pact.
The U.S. and Japan said in a statement published when their initial deal was made in 2019 that they intended to agree to other areas for further trade openings within four months and start negotiations on issues including tariffs, trade in services and barriers to investment.
But neither side seems up for a fresh battle on trade after Trump secured a deal he could trumpet to farmers. Japan could face threats on other fronts if it starts a fresh round and isn’t keen to sit down again with its second-biggest trade partner.
Read more in this article by Bloomberg here.
Future Deals with the United States
This article by Reuters sums up the trade deals Trump is about to negotiate next. Deals with the European Union, the United Kingdom, India, and next phase negotiations with China, and maybe Japan. Busy times ahead.
United Kingdom with Everybody
As we described in our last Brexit Update, the United Kingdom is up for an extremely busy year of negotiating. As it has left the European Union, it now has to renegotiate the over 50 trade agreements the European Union has in place across the globe.