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Ceasefire in the US-China trade war


Summary of the session that took place in FIDE the past 10th of March 2020.
By Frank Samolis – Co Chair of the International Trade Practice of Squire Patton Boggs



US President Donald Trump speaks while meeting China's Vice Premier Liu He in the Oval Office of the White House in Washington, DC [File: Damir Sagolj/Reuters]
US President Donald Trump speaks while meeting China's Vice Premier Liu He in the Oval Office of the White House in Washington, DC [File: Damir Sagolj/Reuters]
Over the past years, we have witnessed the severe trade measures imposed by the United States and China. The economic powers are waging a "trade war" to protect international trade hegemony and the interests of their companies and nationals. With respect to China, the US government has devised a strategic trade plan to strengthen its domestic industry, avoiding dependence on foreign products through the imposition of tariffs and other trade barriers.

Disagreements between governments concerning international trade policy can be traced back to the World Trade Organization’s (WTO) "Doha Rounds", which, among other efforts, led to China's incorporation into the organization in 2001.

The world expected China's regularization in international trade, meeting the standards imposed by the multilateral organization. The major players in international trade expressed their concern about China's competitiveness due to the countries’ internal conditions in relation to labour rights, as well as government aid to Chinese companies, which, under the WTO are considered a violation. However, China’s participation in the WTO did not imply the expected changes in Chinas’ policies that would result in its regularization.

Over the years, the US - among other signatory countries - has condemned China's various breaches of WTO commitments, mainly due to violations of intellectual property rights, domestic subsidy programmes and the imposition of tariffs on US products as retaliatory measures. Moreover, the recent increase of global power, highlighted by the obscurantism that characterizes the Chinese government, has raised suspicions. Investment in the military sector and the strong influence in the countries of the region has alarmed the US government, consequently, triggering the current "trade war".

Subsequent to the imposition of tariffs and following the relevant negotiations, the economic powers agreed upon the first phase of a trade plan in early 2019. Phase One meant the commitment of China to import approximately $200 billion dollars in products from the US until 2021. On the other side, the US agreed no additional or further tariffs would be set on certain Chinese products, estimated to amount $4 billion dollars. Phase Two, scheduled for November 2020 – strategic date as it would take place after the US presidential elections- would, according to the Secretary of the Treasury, involve a commitment to lift other tariffs imposed by the US on Chinese products.

However, the outbreak of COVID-19 has significantly affected global trade, specially affecting China’s economy as the virus spread has taken a toll in both the production and import of products. The US administration anticipates that, following the COVID-19 crisis, China may fail to meet the commitments agreed upon in the first phase, failing to record the expected imports.

The main beneficiaries of this "trade war" are the Asian countries, which have become alternative production centres, offering competitive prices in the market, as well as Mexico and the EU.

While the negative impact mostly affects the WTO as a multilateral organization, as the confrontation between the two powers has meant -among other effects- the infringement of the organization's provisions by the two economic powers, as well as the disruption of the dispute resolution system.

Regardless of the development and eventualities that the spread of COVID-19 may entail, political leaders of the United States and China will have the opportunity to discuss trade policies, both at the United Nations General Assembly in September 2020, as well as within the framework of the G-20 meeting in November 2020.
 
These issues were addressed and discussed at the session held in FIDE the past 10th of March 2020.

Frank Samolis

Frank Samolis is co-chair of the International Trade Practice in Squire Patton Boggs. He advises clients on international trade matters, including trade law, trade policy and legislation, and international trade negotiations. He is also chair of the India Practice Group and the leader of the Colombia Desk, Latin America Task Force in Squire Patton Boggs.
 
Frank handles matters before the Office of the US Trade Representative, other Executive Branch Trade agencies, the US International Trade Commission, US Court of International Trade, US Customs Service and the US Congress. Frank has represented foreign sovereigns or foreign multinationals from Asia, Europe, Central and Latin America, Africa and the Middle East, in addition to US companies seeking expanded market access in major export markets.
 
He also counsels clients on the status of negotiations and bilateral/regional trade agreements in the World Trade Organization (WTO) and other fora, and has represented several sovereign entities in Free Trade Agreement (FTA) negotiations with the US. Frank has been active on such legislative matters as the Trans-Pacific Partnership (TPP), the implementation of the US-Korea Free Trade Agreement, the US-Colombia Free Trade Agreement, the US-Peru Free Trade Agreement, the Uruguay Round of GATT trade negotiations, the North American Free Trade Agreement, extending MFN status and securing PNTR for China, Trade Promotion Authority, and enhancing Caribbean and African trade benefits.




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