Beijing has pledged within the next 30 days to tighten its rules on technology transfers and intellectual property theft, while opening the door – in a potential boon for Australia’s own financial services sector – to stand-alone foreign banking ventures on Chinese soil.
In return, the US government has dropped for now its demands that China relinquish its subsidy-heavy industrial policies, while Washington has retained the right to maintain tariffs on some $US370 billion of Chinese shipments in order to ensure Beijing’s compliance.
Speaking before a packed audience in the East Room of the White House, Mr Trump said the remaining US tariffs on Chinese goods “will all come off” if China agrees to a second deal. He declared the White House signing to be a “momentous step – one that has never been taken before with China – toward a future of fair and reciprocal trade”.
It was the “biggest deal there is anywhere in the world, by far”, he said.
Speaking at his side, Mr Liu said China had established its own unique model of political and economic development, but that this “doesn’t mean China and the US can’t work together”.
After more than two years of brutal negotiations, which triggered financial market meltdowns and damaged business confidence around the world, Mr Trump said he would maintain existing tariffs. “Otherwise we have no cards to negotiate with,” he said.
“I will agree to take those tariffs off if we do phase two,” he said.
Australian exports challenged
Of concern to Australian exporters will be provisions in the 96-page agreement that mandate Chinese purchases of at least $US80 billion in American food and agricultural products over the next two years.
The deal also opens the door to greater US beef imports – challenging Australian cattle farmers’ healthy head-start over their North American rivals thanks to the 2015 Australia-China trade deal.
The US-China deal “will provide US exporters of beef, pork, and poultry, as well as live breeding cattle with expanded access to China’s rapidly growing market”, the US government said in a statement.
While details of the purchase agreements were kept vague, documents published by the White House indicate they include goods such as industrial machinery, pharmaceutical products, medical instruments, iron and steel, hardwood lumber and chemical goods.
“China’s imports of energy products from the United States, such as liquefied natural gas, crude oil, and metallurgical coal, will total at least $US30.1 billion in 2020 and at least $US45.5 billion in 2021.”
Noting what it described as an “unsustainable” deficit with China last year of $US380 billion, the White House said: “China’s increased imports of US goods and services in 2020 and 2021 and beyond should contribute significantly to the rebalancing of the US-China trade relationship.”
Former Australian prime minister Kevin Rudd, who was one of only a tiny group of Australian witnesses at the White House signing, warns in The Australian Financial Review of the likely negative impact of the deal on Australian exporters.
“How on earth can the US seek another $US32 billion of American beef, wheat, cotton and seafood – all listed in the agreement – without Australian exporters becoming collateral damage?,” Mr Rudd writes.
“The same for energy, where LNG and coal are explicitly listed among $US52 billion in extra energy exports to China in 2021 and 2022.
“Australia is currently China’s biggest supplier of both.”
“And given the fact that the Australian government, almost unique among US allies, appears to have killed the political relationship with Beijing stone dead, we currently have negligible political and diplomatic capital to draw on.”
For the best part of an hour, Mr Trump rambled through a long list of congratulations aimed at his closest advisers, cabinet members and dozens of the business leaders gathered at his feet.
The list included some of the world’s biggest financial, industrial and technology companies, including News Ltd, which was represented by chief executive Robert Thomson – prompting Mr Trump to say: “Where’s Rupert [Murdoch]?”
“I can’t believe Rupert’s not here. He’s the greatest.”
“Most of you, I can say, you’re doing fantastically well,” Mr Trump told the business leaders, whose ranks also included the chief executives of UPS, AIG, JPMorgan Chase, Dow Chemical and ConocoPhillips and close Wall Street conduit Stephen Schwarzman, founder of Blackstone.
After almost an hour, Me Liu was invited to read out a message from President Xi Jinping, in which he applauded the negotiations.
“It also shows that our two countries have the ability to act on . . . . equality and mutual respect.”
“In the next step the two sides need to implement the agreement . . . . and optimise the positive impact so as to make even greater progress in China-US economic cooperation,” Mr Xi’s letter stated.
“I hope the US side will treat fairly Chinese companies and their regular trade and investment activities.”
Mr Trump said he go to China in the “not too distant” future to “reciprocate” Thursday’s signing.
“It should have happened 25 years ago,” he said of the deal, which he said represents a “sea change” in global trade.
Among other unique elements in the deal: a requirement that China quickly approve applications from US credit card and payment system providers, with Mastercard, Visa and American Express highlighted by name in the agreement text.