US, China Hold Phase One Trade Deal Update Call
After the first high-level review of the phase one trade deal, the principals talked about progress and ensuring the success of the U.S.-China trade agreement, but some believe the happy talk can't obscure that China and the U.S. are disentangling their mutual dependency in tech goods and services. “There is a re-alignment that is happening in real time,” Rideau Potomac Strategy Group President Eric Miller said in an Aug. 25 phone interview, the day after the call. U.S. and Chinese trade officials reemphasized their commitment to the phase one agreement during the Aug. 24 call, the Office of the U.S. Trade Representative said.
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The call, originally scheduled for earlier this month (see 2008170022), included a discussion on steps China has taken to address intellectual property rights protections, forced technology transfers and the removal of “impediments to American companies” in the financial services and agricultural sectors. The two sides also discussed China’s “significant increases in purchases” of U.S. goods and more actions China needs to take to fulfill its commitments. “Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement,” the USTR said.
China’s Commerce Ministry said the two countries held a “constructive dialogue” on the trade deal. “Both sides agreed to create conditions and atmosphere to continue to promote the implementation of the first phase of the China-U.S. economic and trade agreement,” the ministry said, according to an unofficial translation of a news release.
“They’re not wanting to see this phase one framework slip off the rails completely,” Miller said of the Chinese. He said dialogue is better than not talking, but it doesn't change what he sees as inevitable divergence.
He said businesses are asking: “'Was the Trump shift in China policy an aberration, or was it something that was structural?' I argue it was something that was structural -- that there was an anger building in the United States for a long time around China and their practices. This is something that’s not going to be undone in an administration.”
He said he's counseling his business clients to count on Section 301 tariffs staying in place for at least the first year of a Biden administration, and said that after that, it's hard to say what will happen. He thinks export-oriented manufacturing is moving from China as much as is practical. “I’ve even heard of some cases where people are seriously looking at Myanmar in a way they haven’t in the past” in the apparel sector, he said, because Cambodia lost its preferential treatment in the European Union regime that's similar to the Generalized System of Preferences benefits program.
Miller said it's not just Huawei that will suffer as the Commerce Department tries to make it impossible for it to get chips that have any American technology involved at any stage. He said U.S. students can't get access to lower-end tablets and laptops because of how China has been affected by tariffs and Commerce actions. “In the short term there is a lot of stuff that’s made in China,” he said. “De-integration is messy for both parties.”
“Fundamentally, Chinese technology in America is likely to become more limited over time,” he added.
Miller takes the threat to shut down video-sharing network service TikTok unless it finds a buyer (see 2008240031) very seriously, and said that President Donald Trump's comment that the U.S. Treasury would take a cut of the sale is not being treated as bluster in foreign capitals, even though it's not at all clear what legal mechanism would allow it, or how it would be done. “I talked to at least one other government that expressed to me significant concerns about what are the implications here,” he said, and said that the comment sent a message out again to one of the developed countries that the investment climate in the U.S. is riskier than it used to be.