Trump Administration Remains Hopeful on China Trade Pact Despite Coronavirus

Date: Friday, May 1, 2020
Source: The Wall Street Journal

Senior U.S. trade official expressed confidence that Beijing will meet obligations under deal with Washington

WASHINGTON—A senior U.S. trade official expressed confidence Wednesday that Beijing will meet its obligations under the trade deal with Washington, despite fallout from the coronavirus pandemic and doubts by experts about China’s ability to meet purchase targets.

“There have been certain challenges presented by the coronavirus, but overall the experience that we’ve had is that the Chinese are very, very committed to implementing their commitments,” the senior official said during a briefing with reporters.

Many others question whether China, with its economy hit hard by the pandemic, is able to meet the trade deal’s mandate that it increase purchases of U.S. goods and services by $200 billion over 2017 levels.

“Looking at the supply-and-demand trends, and looking at how ambitious those targets were to begin with, in my view it’s inconceivable that we’re going to hit those targets this year,” said Wendy Cutler, a former senior U.S. trade official and current vice president at the Asia Society Policy Institute.

The American Petroleum Institute, the trade group for the oil-and-gas industry, last week sent a letter to U.S. trade representative Robert Lighthizer and other senior officials reminding them of China’s commitment to purchase $18.5 billion in additional U.S. energy products this year—and suggesting that China might even increase that commitment.

“Further examination of this Agreement may present opportunities to address our domestic oversupply and at the same time, further advance U.S. international objectives,” API President Mike Sommers said in the letter.

Still, even large quantities of oil won’t yield the same revenue as previously given the major drop in energy prices and so may not help satisfy the dollar requirement for purchases.

“You can cover this up a bit because of the virus, but pretty soon we’re going to see all of this exposed, and we’re going to be able to judge whether China begins to make the purchases they promised,” said Michael Wessel, a member of the congressionally mandated U.S.-China Economic and Security Review Commission.

A spokesman for the Chinese embassy in Washington said Beijing has “overcome various difficulties” to implement the agreement during the coronavirus pandemic. “China will continue to enforce the agreement and hopes that the U.S. side will also create favorable conditions for its implementation,” the spokesman said.

The China deal, signed in January, has a clause that allows Beijing to consult with Washington on the purchase agreements in case of a sudden economic setback.

The limited trade agreement, which consists mostly of concessions made by Beijing, is the main tangible result of President Trump’s 2016 campaign promise to raise pressure on the world’s second-biggest economy to balance trade and respect global rules of commerce.

With the U.S. economy also faltering, Mr. Trump is relying on the first phase of the China pact and an amended version of the North American trade rules with Canada and Mexico as his main economic achievements as he seeks reelection this fall.

China’s required purchases include not only U.S. agricultural exports but American energy products, transportation equipment and other goods. The exact product breakdown is classified.

U.S. officials say they expect China to follow through on its commitments. “There have been some issues related to purchases and we really have been talking extensively to the Chinese to stay on track to make the purchases and meet the purchase commitments,” the senior trade official said.

Some progress has been made. This month China belatedly published a required “action plan” for improving intellectual-property protection in the country, a key issue that kicked off the trade spat in 2017, according to a report by the Xinhua state news agency. The road map was supposed to be published within 30 business days of the agreement’s effective date in mid-February.

The senior U.S. trade official said Washington is reviewing the intellectual-property plan and will stay in touch on intellectual-property measures as China rolls them out.

“They took some action on intellectual property that seemed to be in the spirit of the agreement,” said Sen. Chuck Grassley (R., Iowa), chairman of the Finance Committee, in a call with reporters on Tuesday.