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Phase One Trade Agreement: China’s final response

The Phase One Trade Agreement between China and the United States was not fully implemented by China, which evaded a question about the unfinished progress of its commitments.

Overall, the agreement sought to address the U.S. trade deficit with China with a two-year purchase agreement.

China agreed to purchase during 2020 and 2021 at least $200 billion above the 2017 baseline amount of U.S. agricultural products (+$32 billion), energy (+$52.4 billion), manufactured goods (+$77.7 billion) and services (+$37.9 billion).

According to a U.S. Congressional report, China missed its commitment by 60% for goods (and around 57% for goods and services as a whole), due in part to its efforts to diversify agriculture and energy suppliers and the slowdown in trade during the Covid-19 pandemic.

Phase One Trade (2020 to 2021)

Source: CRS.At the same time, China accelerated the return to China of empty sea containers to boost its exports, likely impeding U.S. reloading and exports.

Phase One

On these developments, the Australian government posed the following questions to its Chinese counterpart at a World Trade Organization (WTO) meeting in 2021:

Does China still plan to purchase all 80 billion of U.S. agricultural exports by the end of the Agreement’s deadlines?

If so, does China have any measures in place to encourage its companies to purchase U.S. agricultural products in order to meet the target and to do so on market terms?

All that follows in China’s response:

“Purchases are based on commercial considerations and market conditions. In 2020, Covid-19 severely affected the global economy, trade flows and transportation. Those unexpected factors, among others, were able to influence the market.

“China is an important market. We welcome competitive products from all Members. We will continue to import products based on market conditions, consistent with WTO rules.

“As the economy recovers, we are confident that demand will increase. China will continue to facilitate trade for all Members on the basis of market conditions and in line with WTO rules.”

 

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