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Law360 (May 8, 2020, 12:05 PM EDT ) As tensions over the fallout from the novel coronavirus pandemic continue to strain U.S.-China relations, trade officials from both governments met late Thursday to strike a more harmonious tone by committing to uphold their early-phase trade accord.
Speaking by conference call for the first time since the outbreak began to intensify in January, U.S. and Chinese trade officials updated one another on their efforts to both contain the virus and address its economic fallout. They also reaffirmed their commitment to implementing the trade deal, which in the near term requires China to up its imports of various U.S. goods.
"Both sides agreed that good progress is being made on creating the governmental infrastructures necessary to make the agreement a success," the Office of the U.S. Trade Representative said. "They also agreed that in spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner."
China's Ministry of Commerce issued a similar statement, saying the officials agreed to "create a favorable atmosphere" for the implementation of the agreement and "promote positive results."
The Trump administration struck the so-called phase one trade deal with China last year after two years of escalating tensions and waves of tariffs from either side that covered nearly half a trillion dollars worth of bilateral trade.
The agreement softened a portion of those tariffs and required China to make a number of structural reforms to its intellectual property, technology transfer and agricultural market access rules, among other commitments, all of which could take years to materialize.
But China also committed to make direct purchases of U.S. agricultural, energy and manufactured goods and services totaling $200 billion over the next two years. Critics were skeptical that those benchmarks could be met and the pandemic's wrenching of global supply chains has only further muddied the water.
The call between U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He came days after President Donald Trump also raised doubts about China's potential to meet its purchase obligations.
"Now they have to buy, and if they don't buy, we'll terminate the deal," Trump said during a virtual town hall hosted by Fox News on Sunday.
The phase one agreement includes a dispute settlement system that the Trump administration has touted as key to ensuring that China upholds its commitments. Under that system, if the U.S. or China believes that the other country has violated some portion of the agreement, they must hold bilateral meetings, first among technical-level officials, then at the deputy level, and finally the ministerial level, to resolve the dispute.
If no resolution is reached, the complaining country will be allowed to impose tariffs or other penalties against the accused country that are "proportional" to the damage caused by the violation. If the accused country considers those penalties to be done in "good faith," it cannot retaliate. If it believes the action is in bad faith, the accused country must withdraw from the deal.
--Editing by Alyssa Miller.
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