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President Donald Trump signed today Phase I of a partial trade deal with China.

January 15, 2020

 

China has promised to buy not less than $200 billion in goods and services over the next two years, Phase I will provide the President negotiating leverage for dealing Phase II of the trade deal expecting to have all tariffs come off after the successful completion of phase II. Like in Phase I, there can be several rollbacks in duties for Phase II of the deal The President is not expecting a Phase III.

Phase I requires China to do more to stop the sale of pirated goods and to apply criminal penalties to anyone caught stealing commercial secrets. Beijing is required to deliver an action plan in thirty days after today on how it will meet its commitments.

China has to stop pressuring American companies that invest in China to share technology when entering joint venture partner agreements. Technology transfers must be based on market terms that are voluntary and reflect mutual agreement and companies that should be able to operate without any force or pressure from a Party to transfer their technology to persons of the other Party.

Other stipulations of Phase I include that China must stop supporting or directing the acquisition of overseas investment aimed at buying up U.S. technology companies. The deal includes a dispute mechanism that makes the deal fully enforceable to the point that any rolled back additional duties could be reinstated.

Link to the full text of Phase I of the agreement: https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf

China will have the incentive to negotiate outstanding issues in order to eliminate the additional duties. Ahead of the signing ceremony, the Trump administration revoked its decision to label China a currency manipulator.

This just in, the draft of the soon to be published Federal Register Notice it states that effective February 14, 2020, The U.S. Trade Representative will reduce the level of additional duties from 15 percent to 7.5 percent on products of China covered by Annex A of the August 20 F.R. Notice (List 4a).

Link to the draft:  https://ustr.gov/sites/default/files/enforcement/301Investigations/Notice_of_Modification-January_2020.pdf

 

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