Advantage US, In Trade Deal With China

The US has sought to overcome long-standing bilateral trade, IPR and financial barriers, completely disregarding WTO rules

- James J Nedumpara / Manya Gupta

President Donald Trump famously tweeted in March 2018 that “trade wars are good and easy to win.” The trade war which started in May 2018 with the imposition of Section 232 tariffs on steel and aluminium later spilled over to tit-for-tat tariffs on a range of sectors and products. The retaliatory duties had affected bilateral trade between the US and China, amounting close to $700 billion and covering nearly 65 per cent of the trade.

Moreover, many other countries that were passive onlookers of the trade conflict between the two superpowers were also unwittingly dragged into the battle. For example, the steel and aluminium duties also applied to India; this was subsequently challenged by India in a WTO proceeding.

President Trump’s obsession with China has had several collateral victims. The major casualty is the WTO itself. Retaliatory tariffs are imposed over and above the WTO bound tariff commitments. By the same corollary, the ‘Economic and Trade Agreement’, which Trump and the Chinese Vice-Premier Liu He signed on January 15, is also in complete disregard of the WTO rules. The preferential terms which the disputing countries are providing to each other are also apparently not in line with the MFN (most favoured nation) principle.

What are the major takeaways of the trade deal? Apart from the reduction of tariffs, the Agreement includes various long disputed issues between the US and China. It is divided into eight chapters — intellectual property, technology transfer, trade in food and agricultural products, financial services, exchange rate matters, trade expansion and dispute resolution.