MNI: China Lags On Purchase Commitments, But Tariff Hopes Rise

Beijing policy advisors see it as unlikely that China will meet Phase One trade deal pledges to purchase U.S. goods by a year-end deadline, several told MNI, despite Washington linking the commitments to potential reciprocal cuts to tariffs brought in under Donald Trump.

This week's virtual meeting between Chinese President Xi Jinping and U.S. President Joe Biden has raised hopes in Beijing that some tariffs imposed on Chinese goods during the 2018 trade war could be removed. While U.S. Treasury Secretary Janet Yellen also suggested recently that the U.S. and China could reciprocally lower some tariffs, she added that China should meet Phase One commitments.

Consumer goods such as laptops and toys may receive exclusions on U.S. tariffs, said Shi Yinhong, a China-U.S. relations expert at Renmin University and an advisor to the State Council, though he was less optimistic about any broad cuts to import duties given lags on purchase commitments made under the Phase One deal.

As of the end of September, China had only complied with around 60% of its pledge to buy USD200 billion in additional U.S. goods and services over the two years until the end of 2021. Its target is 76% met for agricultural products, but only 61% for manufacturing goods, and 49% for energy purchases, according to a report by the Peterson Institute for International Economics.

China may not have the economic demand to meet the purchase targets, said Shi, adding that the country could still demonstrate good will in its attempts to do so. Insufficient supplies of U.S. energy products and export restrictions on high-tech products such as chips have also made it difficult for China to boost imports from the U.S., advisors told MNI.

MOVE ON VISAS

Vice Premier Liu He, chief of the Chinese side of the China-U.S. economic dialogue, attended the video call with Xi and Biden, noted Wang Huiyao, founder and president of the Center for China and Globalization and an advisor to the State Council, who said the meeting could be followed by ministerial-level discussions on trade. Shortly afterwards the two countries relaxed restrictions on journalist visas, he noted.

"The two countries may continue with a Phase Two trade negotiation…and it is very likely to promote lowering tariffs as the U.S. is pressured by high inflation and supply chain bottlenecks, while China has expressed willingness to cooperate," said Wang.

Xu Hongcai, deputy director of the Economic Policy Commission of the China Association of Policy Science, agreed that the presidential meeting paved the way for Phase Two talks.

"Surely, China hopes to start negotiations soon, but we can afford to wait," he said.

Other advisors though were less convinced of the likelihood of Phase Two talks once the Phase One agreement expires at the end of the year, noting that the Biden administration may not follow the framework for negotiations with China set under President Donald Trump.

Tariff exclusions for some Chinese goods may come before broader talks, said Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics. The office of the U.S. Trade Representative said last month that it will receive comments on the potential reinstatement of exclusions of tariffs for hundreds of Chinese products, he noted.

U.S. business groups have also pushed for reductions in tariffs, and former Secretary of State Hillary Clinton said on Friday that the U.S. was looking at cutting some of the levies. The U.S. administration has stressed that it remains committed to address areas not yet covered by Phase One, such as industrial subsidies and excess capacity, and that it will continue to pursue longstanding concerns over intellectual property theft and market access.