Trump Signs First Phase of Trade Deal With China

President Donald Trump walks with Chinese Vice Premier Liu He to the East Room of the White House on Wednesday. (AP Photo/ Evan Vucci)

WASHINGTON (CN) — President Donald Trump on Wednesday inked a long-anticipated partial trade agreement with China that will delay tariffs on Chinese imports in exchange for a commitment from the Asian power to up its imports of U.S. goods.

As part of the deal, China will buy $200 billion more in U.S. goods over the next two years and the Trump administration will abandon a 15% tariff that was to go into effect last month, while halving another tariff on $120 billion in Chinese imports to 7.5%.

The deal will keep in place a 25% tariff on a separate $250 billion in Chinese goods.

“Together we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families,” Trump said before signing the agreement Wednesday with Chinese Vice Premier Liu He.

A jovial Trump spent more than half an hour before the signing on Wednesday thanking and praising administration officials and lawmakers who have worked on trade policy and calling out business leaders and personal friends who gathered in the White House to witness the signing.

Among those he called out were GOP megadonor Sheldon Adelson, Fox Business host Lou Dobbs and new Boeing CEO Dave Calhoun, whom he ribbed about the company’s recent high-profile struggles.

Trump said Wednesday that China and the United States will start work on the second and final phase of the deal in the near future.

As expected, the agreement signed Wednesday covers issues of intellectual property and technology transfer, both of which have been longstanding points of contention between the countries.

China commits in the agreement to “ensure fair, adequate, and effective protection and enforcement of intellectual property rights” and signs onto a list of actions it will take on the issue, including which acts it will consider misappropriation of trade secrets.

Archil Cheishvili, the CEO of GenesisAi, said in an interview Wednesday that part of the agreement could be difficult to enforce because the United States might have trouble meeting its burden of proof.

“The second part of the deal with intellectual property protections is something China will definitely not honor,” Cheishvili said.

On technology transfer, the trade deal says any transfer or licensing of technology must be “voluntary and reflect mutual agreement” and that neither country will force the transfer of technology as a condition of market access.

The intellectual property and technology transfer sections cover 19 pages of the 86-page agreement, which the Trump administration made public for the first time after the deal was signed Wednesday afternoon.

How the agreement will be enforced and how the countries will resolve disputes have been key questions for those following the trade deal through the lengthy negotiation process. The agreement released Wednesday requires each country to set up a dispute resolution office led by a specific government official.

If one country thinks the other has violated the terms of the agreement, it can file an appeal in the other country’s dispute resolution office. Officials from each country will then consult on how to resolve the appeal, with higher and higher-level officials meeting with each impasse.

“If the parties do not reach consensus on a response, the complaining party may resort to taking action based on facts provided during the consultations, including by suspending an obligation under this agreement or by adopting a remedial measure in a propionate way that it considers appropriate with the purpose of preventing the escalation of the situation and maintaining the normal bilateral trade relationship,” the agreement states.

If the country accused of cheating believes its accuser’s response was taken in bad faith, it can withdraw from the agreement.

David Gantz, a law professor at the University of Arizona who specializes in trade, said the agreement is “by far the most comprehensive” deal he can remember, but that how it will hold up remains an open question. He said the dispute resolution system, which does not include a third-party mediator, allows the U.S. to quickly snap in place tariffs or other retaliatory measures if China falls short of its obligations.

“You have a situation which may work if both parties are trying to make things work,” Gantz said in an interview. “And that’s a big ‘if,’ I think most people would say.”

He also acknowledged some of the provisions might be hard to achieve, not least of which is the Chinese commitment to purchase $80 billion in agricultural goods over the next two years. Gantz said there are serious questions about whether the United States will be able to supply that amount and if Chinese demand will increase to accommodate the requirement.

How the dispute resolution process will play out if either of these factors prevent China from fulfilling the order will be an interesting test, Gantz said.

While Trump has hailed the deal as a win for the United States and the culmination of one of his core campaign promises, not all of Washington has agreed with his assessment. Senate Minority Leader Chuck Schumer called the deal a “historic blunder,” criticizing the administration for not holding out for more commitments from China to end practices that benefit its own businesses while disadvantaging their foreign competitors.

“I was rooting for the president to succeed for the sake of jobs and wealth and economy in this country,” the New York Democrat said on the Senate floor Wednesday morning. “And I’ve told him that personally, so this phase one deal is an extreme disappointment to me and to millions and millions of Americans who want to see us make China play fair.”

Former Vice President Joe Biden, who is seeking the Democratic nomination to unseat Trump in this year’s presidential election, was similarly critical of the agreement, saying some of the key commitments from China are either “vague, weak” or included in other trade deals.

“True to form, Trump is getting precious little in return for the significant pain and uncertainty he has imposed on our economy, farmers and workers,” Biden said in a statement.

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