Source: The Hindu
Manifest pedagogy: The trade between India and China was always a contentious issue with respect the trade deficits, anti dumping duties and the currency manipulations. In light of the global movement towards trade wars the signing of the trade deal is significantly important move.
In news: The US and China have signed a “phase one” deal.
Placing it in syllabus: International relations
Dimensions:
- Provisions of the agreement
- Importance
- Criticisms
Content:
Provisions of the agreement:
- The initial trade deal defused an 18-month conflict between the world’s two largest economies.
- China has pledged to purchase at least an additional $200 billion worth of US farm products and other goods and services over two years.
- The deal would include $50 billion in additional orders for US agricultural products.
- China would buy $40 billion to $50 billion in additional US services, $75 billion more in manufacturing goods, and $50 billion more worth of energy supplies.
- It canceled planned US tariffs on Chinese-made cellphones, toys and laptop computers and halved the tariff rate to 7.5% on about $120 billion worth of other Chinese goods.
- However 25% tariffs on a $250 billion array of Chinese industrial goods and components used by US manufacturers will be in place.
- Trump has said that the remaining tariffs would be removed once the two sides had negotiated a Phase 2 agreement.
Importance:
- According to analysts, the agreement would add 0.5 percentage point to US GDP growth in both 2020 and 2021.
- It would give new market access to U.S. financial services firms.
- China as a whole would benefit from Western companies being allowed to offer banking, insurance and other financial services.
- Certain provisions like protections for Intellectual Property(IP) would benefit both sides.
- The deal would temporarily halt slowdown of global economy which got intense with the trade war between the world’s two largest economies.
- For the first time in any trade agreement, China has agreed to end its long-standing practice of forcing or pressuring foreign companies to transfer their technology to Chinese companies as a condition for obtaining market access or administrative approvals.
Criticisms:
- The deal doesn’t address Beijing’s ambitious ‘Made in China 2025’ programme, which Washington sees as a direct threat to its supremacy in tech, as Chinese companies get unfair and outsized assistance from the its government in the form of subsidies.
- It also doesn’t address the subsidies that China gives its state-owned enterprises.
- The trade deal won’t reduce US pressure on Huawei, the Chinese telecoms giant as Washington has been lobbying its allies (including the UK) to not use Huawei’s 5G technology services in critical communications infrastructure, alleging it could be used by Beijing to spy on customers.
- Though the agreement talks about opening up market access for financial services firms, analysts opine that it doesn’t go far enough to ensure equal market access to all firms.
- The deal has a dispute resolution mechanism in place, which requires China, once a complaint has been made to begin consultations with the US, with the onus on Beijing to resolve it. However it’s unclear of how US is going to monitor enforcement.
- The deal doesn’t include a definitive timeline on when the tariffs that are still in place will go down. Thus US has left the threat of tariffs in place as a stick to beat China with – in case Beijing doesn’t keep to its commitments.
