Jan 16, 2020

China touts "phase one" trade deal as next step in its own development

President Trump meets with Chinese President Xi Jinping in Osaka, Japan, June 29, 2019. Photo: Xinhua/Ju Peng via Getty Images

President Trump says the initial trade agreement between the U.S. and China is "righting the wrongs of the past," referring to what he views as China's exploitative economic and trade policies. But Beijing is sidestepping that narrative.

The big picture: Domestically, China is presenting the "phase one" deal not as concessions made to a superior foe, but as the logical next phase of its own economic development.

China is casting this agreement as a welcome boost to its transition to an innovation-based economy.

  • In general, intellectual property protections benefit countries that produce new technology.
  • Countries that primarily consume, rather than produce, intellectual property have little incentive to enforce a tough IP protection regime.

Beijing presents its official view right in the text at the top of the agreement:

  • "China believes that enhancing intellectual property protection and enforcement is in the interest of building an innovative country, growing innovation-driven enterprises, and promoting high quality economic growth."
  • Paul Haenle, chair of the Carnegie-Tsinghua Center for Global Policy in Beijing, told NPR that most of this positive messaging "seems geared towards the Chinese people, to say, 'We are not going to allow the Americans to slow our rise, to obstruct our rise.'"

Between the lines: China's agreement to purchase a set amount of American products may boost the U.S. economy in the short term, but in some ways, it's at odds with long-term U.S goals.

  • "Purchasing commitments are more in line with a state-driven economic model than a market-driven model, the latter of which the United States aims for China to adopt," according to an analysis published on Jan. 15 by the Center for Strategic and International Studies.

Details:

  • The deal, which eases the two-year-long trade war between the countries, reduces tariffs on $120 billion in Chinese goods, though it leaves most tariffs in place —including 25% tariffs on Chinese products that U.S. factories use to assemble goods.
  • It also lays out rules for the protection of patents and other intellectual property.
  • China agreed to buy $200 billion in U.S. products and services over the next two years.
  • The agreement includes an evaluation and enforcement framework that the U.S. hopes will help safeguard intellectual property from the rampant theft that has long plagued U.S. organizations.
  • It avoids thornier structural issues, such state subsidies for some of China's top companies that the U.S. has long decried as unfair.

What's next: There's still a long road ahead to a future "phase two" deal that addresses deeper structural concerns about the Chinese economy. For now, watch for signs that the new evaluation and enforcement mechanism is doing its job.

Go deeper

The "phase one" deal isn't all that it seems

Vice Premier Liu He and President Trump after signing phase one Wednesday. Photo: Mark Wilson/Getty Images

There was limited fanfare from the stock market after President Trump and Chinese Vice Premier Liu He signed the "phase one" trade deal yesterday.

What happened: The 94-page document will roll back some U.S. tariffs on Chinese goods and see China increase purchases of U.S. goods and services by $200 billion over two years, but it leaves more questions than answers, experts say.

Go deeperArrowJan 16, 2020

U.S.-China trade deal could be good for Big Pharma

Illustration: Aïda Amer/Axios

President Trump's new trade agreement with China includes patent protections that could be a big boon to drug companies.

Why it matters: China's enormous population is a lucrative market for pharma, and the country is also actively trying to build up its own domestic drug industry. But it's not guaranteed that China will actually abide by the agreement.

Go deeperArrowJan 16, 2020

China to cut tariffs on $75 billion of U.S. goods

Chinese Vice Premier Liu He and President Trump at the White House on Jan. 15. Photo: Mark Wilson/Getty Images

China will halve tariffs on about $75 billion of imports from the U.S., effective Feb. 14, the country's finance ministry said in statements posted to its website Thursday.

Why it matters: This is another sign of tensions easing in the prolonged trade war between the U.S. and China that's brought major uncertainty to the markets and hurt the U.S. manufacturing industry and farmers.