The “phase one” trade deal that President Trump signed with Beijing Wednesday includes new protections for U.S. businesses and entrepreneurs from currency manipulation, intellectual property theft, online piracy, and forced transfer of technology and trade secrets.
The initial deal, though, does not include specific provisions addressing Chinese subsidies for key businesses and its requirements for U.S. companies to partner with domestic businesses, two of the problems that prompted the Trump administration to confront China over trade.
“Importantly, the reforms included in the agreement are fully enforceable and include a strong dispute resolution system to ensure effective implementation and enforcement,” Trump said Wednesday.
The deal, however, does not include any mechanism explicitly allowing the United States to impose new tariffs on China should it not live up to its commitments, which had been one of the Trump administration’s goals for the deal. If one party thinks that the other is acting in bad faith, then the only remedy is to quit the agreement, said a senior White House official.
“If we decide to take an action against them for a violation of the agreement, they will have to make an assessment as to whether they want to stay in the agreement,” the official said.
The deal, agreed to last month but first made public following the signing, requires both countries to honor commitments made to the Group of 20 to refrain from currency devaluations or otherwise acting to set exchange rates for “competitive purposes.” The G-20 is the international body that sets global economic standards.
On intellectual property, the deal requires China to formally prohibit the unauthorized disclosure of trade secrets and similar confidential business information during any criminal, civil, administrative, or regulatory proceedings conducted by Chinese government officials. U.S. business groups have long alleged that such procedures were a cover to force them to relinquish trade secrets. The deal also calls on China to impose heavier punishments for intellectual property theft or infringements.
Beijing will also be required to cover for delays in getting patents extended to China by providing compensation to the holder. The deal defines an “unreasonable delay” as a wait of four years or more from the date of filing of the application to its issuance. China will also have to compensate the patent owner for loss of the use of the patent as a result of the marketing approval process.
“Phase one” requires China to provide stepped-up enforcement of online piracy, including “an effective notice and takedown system” to combat online infringement. E-commerce platforms in China that repeatedly fail to stop the sale of counterfeit or pirated goods can have their operating licenses revoked.
The deal also requires Beijing to quickly and “effectively” protect pharmaceutical patents from counterfeit medicines and biologics.
The Trump administration does not appear to have gotten Beijing to drop requirements for U.S. companies to partner with Chinese ones to gain access to its markets. The practice is widely seen as a key means by which China forces U.S. companies to share trade secrets. The deal does say that neither country may “require or pressure” others to transfer technology “in relation to acquisitions, joint ventures, or other investment transactions.”
There is no agreement in the deal to reduce existing U.S. tariffs on Chinese goods tariff, contrary to some reports, said the White House official. Any such reduction would have to come as part of new negotiations with Beijing for ‘phase two’ of the deal.
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