What’s in the Phase One Trade Agreement Between the US and China?

By Sharon Lo, Managing Editor, DTJ & The Source

The Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China was signed January 15. This is the first phase of the trade deal that was announced in December. Here is an overview of what it covers:

Intellectual Property
Theft of intellectual property has been an ongoing concern for US companies. The trade agreement includes a chapter on intellectual property aimed at strengthening and enforcing penalties for intellectual property theft. Specifically, the chapter addresses concerns in the areas of trade secrets, patents and pharmaceutical-related intellectual property, geographical indications, trademarks, and enforcement against pirated and counterfeit goods.

Technology Transfer
China had long required or pressured foreign companies to transfer their technology to Chinese companies to gain market access, administrative approvals, or advantages from the government. The trade deal ends this practice. Instead, any transfer of technology will be made voluntarily and under market terms. China will also refrain from directing or supporting outbound investments aimed at acquiring foreign technology in sectors and industries targeted by a party’s industrial policies.

Trade in Food & Agricultural Products
The trade agreement further opens China’s food and agriculture market to American products and addresses structural barriers to trade. As part of the deal, China will purchase and import on average $40 billion or more of food, agricultural, and seafood products from the US annually for a total of at least $80 billion over the next two years. Products will cover a full range of US food, agricultural, and seafood products. On top of that, China will strive to import an additional $5 billion per year over the next two years.

Financial Services
The Financial Services chapter addresses trade and investment barriers to US companies providing a range of financial services, including securities, insurance, electronic payments, fund management, banking, credit rating, futures, and distressed debt services. Removal of barriers, such as foreign equity limitations and discriminatory regulatory requirements, will create opportunities for US companies to supply these services in the Chinese market.

Macroeconomic Policies & Exchange Rate Matters & Transparency
The US had previously labeled China a currency manipulator, and the chapter on Macroeconomic Policies and Exchange Rate Matters and Transparency addresses those concerns. It tackles unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting of exchange rates. It also promotes transparency and provides mechanisms for accountability and enforcement.

Expanding Trade
The Expanding Trade chapter includes commitments from China to import a variety of US goods and services over the next two years. The total amount of imports will exceed China’s annual level of imports for those goods and services in 2017 by no less than $200 billion. As mentioned above, China will import at least $80 billion in food, agricultural, and seafood products over the next two years. Other products China is expected to import include various US manufactured goods, energy products, and services. 

Bilateral Evaluation & Dispute Resolution
Agreement implementation and procedures for addressing disputes, including allowing each party to take proportionate responsive actions that it deems appropriate, are outlined in the Bilateral Evaluation and Dispute Resolution chapter. Other chapters also include provisions on enforcement of the agreement’s terms.

To read the entire agreement or to take a look at the fine print from any one of these chapters, visit: https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf