With news that China and the USA have put pen to paper on a phase one trade deal, the hope is that this new deal will initiate a reversal of the negative economic impacts that have been felt in the wake of the trade war. Nevertheless, there is widespread doubt around whether its details will be released to the global public. There are also question marks over whether Beijing can actually meet the high purchasing demands. High-ranking administration officials from Trump's government insist that the details of the new deal will be published, but scepticism surrounds whether the full text and numbers involved will be disclosed.
It was previously claimed by the US Trade Representative that there will be some aspects of the deal that remain hidden from the public to avoid market manipulation. This would include, for example, details of targets for Chinese commodity purchases.
It has been suggested that the public will be presented with the "top line" numbers for certain categories, but not the lines for individual products. This comes from a statement by the former deputy director of the USA's National Economic Council who was part of the negotiating team with their Chinese counterparts.
There is no legal obligation for the Trump administration to release the full details of the deal, since it was an executive agreement that required no congressional approval. A former advisor to the Trump administration regarding China issues, Derek Scissors, has expressed a firm belief that the US put forward a certain underwritten commitment. This would state that tariffs would be cut further if the Chinese are on track to make the $200 billion of extra purchases they pledged over the next 2 years.
It is generally accepted that China will be unwilling to sign off on any translation that infers wrongdoing on their part. They would never want to admit that they have engaged in coercive technology transfer, so it could turn out that the Chinese version of events differs from the US version.
A semi-official Chinese social media account called Taoran Notes recently directed readers to a December 2019 statement from the Ministry of Commerce. In it, they suggested that the contents of the agreement will be presented to the public following official signing. But it is very common for trade agreements to lack certain information when published, and the Chinese government would not want to damage relationships with any other trading partners. If Beijing meets US demands to purchase an extra $200 billion of goods and services in the next 2 years, some other suppliers to China could lose out.
The Chinese government would also aim to prevent a domestic public backlash that could occur if they reveal hefty concessions to the US in the deal. Trade experts have warned that non-disclosure is not uncommon. For example, a free trade agreement was reached between Singapore and Taiwan in 2013, but the Singapore side has never publicly acknowledged it.
Ever since the publishing of the fact sheet from the US Trade Representative, global economists have debated whether China will be able to meet its lofty purchasing demands. Effectively, it would double China's importing of US goods and services, which stood at around $180 billion in 2017. Recent reports have indicated the purchases would cover 4 areas:
If we started from Beijing's 2017 import levels and added the $200 billion, it would amount to $576 billion of US goods and services over 2 years. This looks like an incredible sum, but it is achievable in theory - in 2017 alone, China's total import of goods was worth $1.84 trillion.
Analysts in China have expressed confidence in the nation's ability to meet US demands to purchase at least $80 billion in agricultural goods over the 2 year period. But they have asserted that tariffs would need to be reduced, or waivers put in place, to ensure private buyers join their state counterparts in importing US farming products.
The majority of the new imports would come in the form of soybeans, with commodities like frozen pork, nuts and fruits, sorghum, cotton, wheat, corn, poultry and more. However, agricultural imports are complicated by a widespread outbreak of African swine fever in China, leading to a mass culling that has caused as much as one-quarter of the world's pigs to be destroyed. One consequence of this has been that China requires an alternative source of high-protein food for human consumption. Imports of pork and beef hit record levels last November.
China has often been resistant to US farming methods due to certain hormones and additives they use, but this could be relaxed. US meat sales could also be boosted by Australia's devastating wildfires, which are already impacting on the country's beef exports. However, the predictions about China purchasing vast amounts of soybeans from the US could be dependent on the swine fever situation, since animal feed would be the primary use for those imports. The current wintry conditions in Northern China are likely to complicate the process of eliminating the crisis.
No doubt, the US-China trade deal will be complex, and fraught with challenges for both sides. The demands of the Trump administration are high, and press coverage of the trade war has caused widespread concern. Neverthess, with this new deal, if the challenges can be overcome, then there is hope that this deal will start a reversal of the negative economic impacts of the trade war. There is reason to be cautiously optimistic.