MNI EXCLUSIVE: China Advisors Doubt Long-Term Trade Deal Goals

     BEIJING (MNI) - China should be able to meet targets under its phase one

trade deal over the next two years, market conditions allowing, government

advisors told MNI, but they cautioned that the agreement's dispute resolution

mechanism could contain the seeds of its collapse and that its longer-term

targets for growth in trade may be unrealistic.

     Adding $32 billion of agriculture purchases over two years as agreed is

"more reasonable" than the $40-50 billion increase previously called for by the

U.S., said Luo Zhenxing, a researcher at the Institute of American Studies at

the Chinese Academy of Social Sciences.

     The inclusion of a broad range of products such as meat, seafood, fruit and

nuts as acceptable purchases in the agricultural category in the final deal

makes it easier to achieve, although "with some effort," despite the falling

trend for U.S. farm imports over the past 24 months, Luo said.

     But the commitment to continue to expand purchases of farm products,

together with imports of manufactured goods, energy products and services from

2022 to 2025 "will bring greater pressure," he said.

     --FOCUS ON IMPORTS, NOT US DEFICIT

     Chinese government policies to stimulate domestic demand and boost the

purchasing power of its 1.4 billion people, including a 400-million-strong

middle class, should enable it to meet the commitment to increase U.S. imports

by $200 billion from 2017 levels through 2022, said Wei Jianguo, former vice

minister of commerce.

     But the commitment - which also calls for increases of $77.7 billion in

manufactured goods, $52.4 billion in energy products and $37.9 billion in

services - is demanding, cautioned Wei, and, as China's government will not make

purchases itself, compliance will depend on market conditions and the

availability of high-quality U.S. products at competitive prices.

     The deal's focus on increasing Chinese imports, rather than the $200

billion reduction in the U.S. trade deficit with China initially sought by

Washington, makes it more enforceable, according to Cui Fan, deputy general

secretary and director of research at the China Society for WTO Studies. The

U.S. has also dropped its insistence that China should not be allowed to

retaliate against tariffs, Cui noted.

     But the dispute resolution arrangement, which does not involve a third

party and is "totally up to the two countries," is potentially problematic, said

Cui, and could open the way to either country shelving the deal in the event of

an impasse.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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