China Trade Agreement Phase 2: What it Means for the US and the Global Economy

After months of negotiations, the US and China finally reached Phase 1 of their trade agreement in January 2020. But what about Phase 2? What can we expect from this next phase of negotiations between the world`s two biggest economies?

First, let`s review what was covered in Phase 1. The agreement called for China to increase purchases of US goods and services by $200 billion over the next two years. This includes $32 billion in agricultural products, $52 billion in energy products, $78 billion in manufactured goods, and $38 billion in services. In addition, China agreed to strengthen its intellectual property protections and to stop forcing US companies to transfer technology to Chinese firms in order to do business there.

So, what can we expect from Phase 2? The scope of the negotiations will likely be much broader, covering topics such as China`s state subsidies for industries, its industrial policy, and market access restrictions. There will also be discussions around issues such as cybersecurity, human rights, and Hong Kong.

One of the main issues that will be addressed in Phase 2 is China`s state subsidies for industries. Critics argue that China`s state subsidies give an unfair advantage to its industries, making it difficult for other countries to compete on a level playing field. For example, China has heavily subsidized its steel and aluminum industries, leading to overproduction and a glut of steel and aluminum on the global market.

Another issue that will be addressed is China`s industrial policy, which seeks to promote the development of domestic industries through a variety of measures. This has led to concerns that China`s policies could result in the displacement of companies from other countries, as well as a loss of jobs.

Market access restrictions will also be a topic of discussion. The US has long complained about China`s restrictions on foreign investment and trade, including requirements for companies to form joint ventures with Chinese firms in order to do business in the country. The US will likely push for increased market access for its companies, as well as greater protection for intellectual property.

Finally, the negotiations will also address issues of cybersecurity, human rights, and Hong Kong. The US has accused China of engaging in cyber espionage and intellectual property theft, and will likely push for greater protections against these practices. The US has also been critical of China`s human rights record, particularly in Xinjiang province, where the Chinese government has been accused of detaining over one million ethnic Uighurs in “re-education” camps. Finally, the US has been vocal in its support for democratic freedoms in Hong Kong, and will likely push for China to uphold the “one country, two systems” agreement that has been in place since Hong Kong`s handover from the UK to China in 1997.

In conclusion, the Phase 2 negotiations between the US and China will be wide-ranging and complex, covering a variety of issues that are crucial to the global economy. The negotiations will be closely watched by economists, politicians, and business leaders around the world, as they will have a significant impact on trade and investment between the two countries and beyond.