Incentives are strong for China and the U.S. to retain the phase one trade deal, an economist at S&P Global wrote May 14, in a report called “U.S. and China Kick Trade Deal Can Down The Road.” While the report's author said it's possible the Trump administration would hike tariffs on China to punish that country for COVID-19, “we have long thought that, from an economic perspective, technology not trade is the core issue in the U.S.-China relationship. Technology has been and will continue to be the key driver of growth in China. It is at the heart of intellectual property, market access, and level playing field debates.” Chief Economist Shaun Roche said the two countries are on a path toward technological decoupling, no matter how the purchases shake out that are promised in the phase one deal.
The United Kingdom published its negotiating objectives for a free trade deal with Japan and said the first round of negotiations will begin “shortly,” according to a May 12 notice from the U.K.’s Department for International Trade. The U.K. said it wants “cutting edge provisions” on digital trade and wants “zero or lower tariffs” for its exporters, including its textile and clothing manufacturers. The U.K. said talks will begin through videoconferences until international travel is safe.
China is considering imposing tariffs on imports of Australian barley as a result of an ongoing antidumping investigation, Australian grain groups said. The tariff may include a dumping margin of up to 73.6% and subsidy margin of up to 6.9% for Australian barley, according to a May 9 statement from the Grains Industry Market Access Forum, the Australian Grain Exporters Council, GrainGrowers, Grain Producers Australia and Grain Trade Australia. The groups said China “may provide their final determination” by May 19. During a May 11 press conference, a Chinese Foreign Ministry spokesperson called the move a “normal trade remedy investigation” and said it complies with World Trade Organization rules.
Both the U.S. and China still plan to meet their commitments under the phase one trade deal despite the economic disruption of the COVID-19 pandemic, U.S. Trade Representative Robert Lighthizer said. During a May 7 conference call, he, Treasury Secretary Steven Mnuchin and China’s Vice Premier Liu He agreed “good progress” is being made by both sides to “make the agreement a success,” USTR said. The officials also discussed measures being taken by the U.S. and China to support their economies during the pandemic and agreed to hold more conference calls on a “regular basis.”
The United States notified the World Trade Organization that it has fully complied with the WTO's findings in the Boeing subsidies dispute, the Office of the U.S. Trade Representative said May 6. The European Union and U.S. have been battling for 15 years over whose subsidies to their aircraft manufacturers distort trade. The WTO has said that both sides were in the wrong, and the U.S. currently has Section 301 tariffs on about $7.5 billion worth of European aircraft, food, apparel, linens, tools, wine and spirits in a WTO-sanctioned retaliation for past Airbus subsidies.
The U.S. Chamber of Commerce, in an updated list of its priorities for a U.S.-United Kingdom free trade agreement, said it wants a “single, comprehensive agreement,” not a phased approach that resolves just “a subset of issues.” The Chamber released its list the same day negotiations began (see 2005050014) May 5. It wants the U.S. and the U.K. to eliminate all tariffs on industrial goods, to address non-tariff barriers in industrial goods, and for the U.K. to end what the Chamber calls “non-science-based restrictions on agricultural trade.” The Chamber also is calling for the administration to promptly remove Section 232 tariffs on British steel and aluminum.
The U.S. officially announced the launch of the first round of trade negotiations with the United Kingdom (see 2005040034) on May 5, saying nearly 30 negotiating groups will discuss trade terms over the next two weeks. The first round of virtual talks will be followed by more rounds every six weeks until international travel is safe, the U.K.’s Department for International Trade said. Both sides said they are seeking an “ambitious agreement” and plan to negotiate quickly. “We will undertake negotiations at an accelerated pace,” U.S. Trade Representative Robert Lighthizer said in a statement.
President Donald Trump suggested China may not meet its purchase commitments under the phase one trade deal and threatened to terminate the agreement if the commitments are not met. “We're going to have to see what's going on,” Trump said during a May 3 Fox News town hall event. “They have to buy. And if they don't buy, we terminate the deal. Very simple.”
Mexico and the European Union have reached agreement on a new trade deal, they said April 28. The new deal, which will replace an existing free trade agreement between the countries that took effect in 2000, will eliminate more tariffs on trade between Mexico and the 27 EU member states, and include provisions on “simpler customs procedures,” the EU said in a press release.
Brazilian and U.S. business organizations are asking their two countries to reach a trade deal in 2020, “with priority on modernizing trade and customs, establishing good regulatory practices, creating rules for digital trade, and combating corruption,” they said in a letter sent last week and released to the public on April 27. “These trade disciplines can be achieved without requiring either U.S. legislation or Mercosur’s involvement, and they would substantially reduce unnecessary costs and enhance bilateral trade and investment,” they said. Brazil is in a customs union known as Mercosur, or South American Common Market, and thus cannot lower its tariffs without other countries' consent.