US, China com­mit to phase 1 trade deal in phone call

The Pak Banker - - MARKETS / SPORTS -

Top US and Chi­nese trade of­fi­cials have reaf­firmed their com­mit­ment to a Phase 1 trade deal, which has seen China lag­ging on its obli­ga­tions to buy Amer­i­can goods, giv­ing a boost to fi­nan­cial mar­kets on Tues­day.

The pledge was made in a telephone call be­tween U. S. Trade Rep­re­sen­ta­tive Robert Lighthizer, U. S. Trea­sury Sec­re­tary Steven Mnuchin and Chi­nese Vice Premier Liu He - their first for­mal di­a­logue since early May - amid con­cern the deal could be on shaky ground be­cause of wors­en­ing US- China ties.

"Both sides see progress and are com­mit­ted to tak­ing the steps nec­es­sary to en­sure the suc­cess of the agree­ment," the U. S. Trade Rep­re­sen­ta­tive's of­fice ( USTR) said in a state­ment af­ter what it de­scribed as a reg­u­larly sched­uled call.

The call was orig­i­nally ex­pected on Aug. 15, six months af­ter the trade deal was launched. But Pres­i­dent Don­ald Trump, who has fre­quently ex­pressed anger at China over the novel coro­n­avirus pan­demic, said last week he had post­poned talks with China be­cause "I don't want to deal with them now."

Wash­ing­ton and Bei­jing have traded sanc­tions and barbs over a grow­ing list of is­sues in­clud­ing a new na­tional se­cu­rity law im­posed on Hong Kong, China's dis­puted ter­ri­to­rial claims in the South China Sea, the coro­n­avirus and U. S. ac­cu­sa­tions of na­tional se­cu­rity threats posed by Chi­nese tech firms.

China's com­merce min­istry con­firmed that the two sides had a "con­struc­tive di­a­logue" and agreed to con­tinue push­ing for­ward the im­ple­men­ta­tion of the Phase 1 trade deal. The USTR said they "ad­dressed steps that China has taken to ef­fec­tu­ate struc­tural changes" on is­sues in­clud­ing pro­tect­ing in­tel­lec­tual prop­erty rights, re­mov­ing im­ped­i­ments for U. S. firms in the fi­nan­cial ser­vices and agricultur­e sec­tors and elim­i­nate forced tech­nol­ogy trans­fers.

"The par­ties also dis­cussed the sig­nif­i­cant in­creases in pur­chases of U. S. prod­ucts by China as well as fu­ture ac­tions needed to im­ple­ment the agree­ment," it said. News of the call helped lift global stocks and Asian cur­ren­cies.

"U. S.- China talks are bullish for most com­modi­ties as Trump is des­per­ate for good news to help in the elec­tion," said Ole Houe, di­rec­tor of ad­vi­sory ser­vices at agricultur­e bro­ker­age IKON Com­modi­ties in Syd­ney

"It could lead to higher de­mand for U. S. prod­ucts." Chi­nese pur­chases of U. S. goods are run­ning well be­hind the pace needed to meet a first year in­crease of $ 77 bil­lion spec­i­fied in the deal, ac­cord­ing to of­fi­cial data.

While China has re­cently ramped up buy­ing of farm goods in­clud­ing soy­beans, it is far from meet­ing its com­mit­ment to buy $ 36.5 bil­lion worth of U. S. agri­cul­tural goods un­der the deal - pur­chases that Trump has counted on to bol­ster his sup­port in farm states that backed him in the 2016 elec­tion.

The United States ex­ported just $ 7.274 bil­lion in agri­cul­tural goods to China in the first half of the year, ac­cord­ing to the U. S. Cen­sus Bureau.

The U. S. com­ments "showed that they think we are go­ing to keep buy­ing from the U. S., at least be­fore the elec­tion takes place. And we will," an agri­cul­tural goods trader with a Chi­nese state- owned firm told

Reuters, de­clin­ing to be iden­ti­fied as he is not au­tho­rized to speak to me­dia.

"We are def­i­nitely go­ing to main­tain the stance to buy as much as pos­si­ble, but it is re­ally hard to say whether the tar­gets can be reached." Sushant Gupta, re­search di­rec­tor at the Wood Macken­zie con­sul­tancy, said it ex­pects China to im­port more Amer­i­can LPG, propane and eth­ane in the sec­ond half of this year to meet petro­chem­i­cal feed­stock short­ages, but does not ex­pect China to be able to in­crease U. S. crude im­ports enough to meet the Phase 1 tar­gets. China bought only 5% of the tar­geted $ 25.3 bil­lion in en­ergy prod­ucts from the United States in the first half of 2020.

Chi­nese state- owned oil firms have booked tankers to carry at least 20 mil­lion bar­rels of U. S. crude for Au­gust and Sep­tem­ber.

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