The “phase one” U.S.-China deal that takes effect today could bring relative peace on the bilateral trade front this year as President Donald Trump runs for reelection. But while much of the attention will be on how close China comes to meeting a commitment to buy an additional $200 billion worth of goods over the next two years, the agreement also contains a number of deadlines for China, and to a lesser degree, the United States, to take regulatory actions to pave the way for increased trade.

Within the next seven working days, USDA’s Animal and Plant Health Inspection Service and China’s customs agency are required to sign a protocol to allow for the importation of U.S. potatoes. China is also required by Feb. 24 to formally recognize the U.S. dairy-safety system is as safe as its own and to allow imports of pork inspected by USDA’s Food Safety and Inspection Service.

In two other agricultural areas, China is required by March 14 to lift its ban on U.S. pet foods containing ruminant ingredients and to eliminate cattle age requirements for imports of U.S. beef and beef products. The two sides are also required by that date to begin technical discussion aimed at clearing the way for China to import U.S. breeding cattle.

There are also a number of deadlines associated with increased intellectual property rights protection scattered throughout the deal. Those include requirements for China to produce an “action plan” within 30 working days to strengthen IPR protection and to “significantly” increase IPR enforcement actions by May 14.

U.S. businesses wary of phase one enforcement: A survey released Thursday by the U.S.-China Business Council found that only around 20 percent of member companies that were polled would use the agreement's dispute settlement process.

The agreement creates a multilevel process in which government officials from either side can try to resolve complaints. U.S. companies can raise issues with administration officials. A dispute that cannot be resolved can result in tariffs being reimposed. Most companies indicated they would raise complaints through trade associations or anonymously, the survey found.

“That caution is probably a good thing because what we don’t want is small or idiosyncratic issues, perhaps at the local level, to be raised as large systemic issues,” said council President Craig Allen, who added that the agreement “absolutely helps to solve problems in China.”

CONGRESS ENTERS THE HUAWEI FRAY: Sen. Rick Scott (R-Fla.) wants Congress to codify further restrictions the administration is currently weighing against Huawei and its subsidiary HiSilicon. The legislation introduced Thursday would put into law a change to the amount of U.S. content a foreign-made item can contain, from 25 percent to 10 percent, before it can be sent to Huawei without being subject to export controls. U.S. semiconductor companies have found the loophole a useful way to continue business despite Huawei’s placement on the Commerce Department’s entity list, which amounts to an effective export ban.

“We know Huawei is supported and controlled by the communist regime in Beijing, which continues to violate human rights and steal our data, technology, and intellectual property," Scott said in a statement. "Companies in the United States should not be allowed to sell to Huawei, and my legislation will further restrict their ability."

COMMERCE EXTENDS HUAWEI WAIVER: The administration is still debating whether to tighten export restrictions on Huawei, but Commerce on Thursday said it would extend a waiver that provides some relief for U.S. companies on a limited range of business activities. Commerce decided to extend the so-called temporary general license for another 45 days. Extending the temporary export waiver will allow Huawei to purchase any U.S.-origin hardware or software it needs to continue supplying rural internet providers in the U.S.

“The TGL is intended to allow time for companies and persons to shift to alternative sources of equipment, software and technology (i.e., those not produced by Huawei or one of its listed affiliates),” Commerce said.

WINE INDUSTRY BRACES FOR MORE TARIFFS TODAY: U.S. wine importers, distributors and retailers are on edge as they wait for an expected USTR decision late this afternoon that could result in higher retaliatory duties on $7.5 billion of European wines and many other goods.

USTR is considering the action in a long-running dispute over European support for Airbus. USTR imposed a 10 percent duty on European aircraft and a 25 percent duty on a variety of products in October. But it has proposed raising duties to 100 percent, and revising the retaliation list by taking some items off and adding others.

The trade agency has received over 28,000 comments from parties affected by the dispute. Many are from wine importers whose businesses have already been hurt by the duties. In contrast, the intended target, French wine producers, have been able to make up for lost U.S. sales by shifting their exports to China and other markets, they said.

“When faced with a problem like this, the Europeans will not hesitate to sell to China or wherever they can,” Jamie Graves, an employee at Skurnik Wines and Spirits in Brooklyn, said in his comments to USTR. “Once that starts, it will be very hard for the U.S. to recover.”

Reality check: One Washington trade veteran said his sense was USTR would rotate some items on the list but would not greatly escalate the duties because of the negative impact that could have on ongoing efforts to reach a mini deal with the EU.

THROWING COLD WATER ON THE WTO TARIFFS IDEA: USTR is distancing itself from a report that the Trump administration is considering a plan to increase the U.S.’s bound tariff rates at the WTO, or the duty levels the country has long agreed not to exceed.

Bloomberg reported this week that the administration would potentially make the move as a way to further shake a global trading system that Trump has long criticized for being tilted against the United States. But when asked by POLITICO about the report, USTR replied that “there are no plans at this time to raise our bound tariff levels at the WTO.”

The spokesman did, however, underscore that the administration "has expressed numerous times that we are very troubled that many of our trading partners have tariffs that are much higher than the United States."

View from the Hill: Senate Finance Chairman Chuck Grassley also fired a warning shot at the administration, noting that Trump could not make such a move without a go-ahead from Congress. “If anybody’s thinking of moving ahead and leaving Congress out of it, they can't do that,” Grassley told reporters.

FISHERIES CHAIR ASKS FOR SUPPORT OF WTO AMBASSADORS: At a meeting with the heads of delegation at the World Trade Organization on Thursday, Santiago Wills, the chair of the fisheries negotiations, called on WTO members to “step out of their trenches” to seek a compromise, he told Morning Trade.

Wills, who is the ambassador for Colombia and just recently became chair, is eager to reach a deal by the next Ministerial Conference in June. “I called the meeting to report back to ambassadors what we have been doing in the negotiations on the level of delegated and to seek political support for the way forward,” he said, explaining that “on certain issues we need to get a certain engagement at a higher political level.”

What are the main obstacles? Wills didn’t want to say which topics of the fisheries negotiations are the most sensitive. “Some sensitive topics are political, others sensitive issues are technical. It also depends on each of the members. I’m requesting flexibility and a will to compromise. … [Members must] step out of their trenches even if that means leaving behind years-old positions and defense tactics instead of compromising.”

Wills remains optimistic that a deal is possible by June. “We are going to need a lot of effort and work very hard, but that’s still my aim and I think it’s still realistic.

Unintended burden: The WTO sees the fisheries negotiations as important not only to help stop overfishing but also to help rebuild trust in the multilateral trading system. Wills is fully aware of the importance of the talks for the WTO, he said. “It’s an unintended burden that I take with the biggest responsibility. We need to show the world the WTO is still relevant and deliver on what’s been asked from us.”

Source: Politico