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Is the US giving China a club to bludgeon US companies with? A trade negotiations update

Apr 17, 2019

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

  • The US and China have made significant progress towards a trade deal, with both sides citing progress in recent comments
  • A key demand of the US has been a mechanism to address enforcement of the agreement, with the US fearing China may not abide to certain aspects once the deal is in force
  • President Trump has said he wants China to face consequences in the event it fails to live up to what it agreed to
  • Today, Treasury Secretary got lots of attention when he announced that the enforcement mechanism in the agreement will be reciprocal, describing it as "a two-way agreement in enforcement"
  • He added the US is open to "certain repercussions" if it did not live up to its committments in the agreement

 

us china

 

  • Critics were quick to cry foul over this type of agreement, for a number of reasons
    • First is the unease of having China be the final arbiter over issues relating to US companies
    • Second is concern in Congress it is being left out in talks that include the potential for unilateral sanctions from either side as part of enforcement
    • Third is the idea of an avenue other that the World Trade Organization (WTO) to resolve trade disputes between 2 countries (in this case the US & China)

 

  • This type of arrangement would basically neuter the WTO and potentially make it much less relevant
  • As President Trump has been a fierce critic of the WTO, calling it slow to resolve trade disputes, that outcome would probably be fine with him
  • The US & China have been the 2 largest users of the WTO trade dispute resolution system and both have major cases underway there

 

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