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The Asia Pivot
China, U.S. Reach Agreement on Trade Liberalization

At the APEC conference in Beijing this week, China and the U.S. reached a massive agreement in negotiations over tariffs on IT products. The agreement sets the stage for the liberalization of up to $1 trillion in global trade when the item, the Information Technology Agreement (ITA), comes up for World Trade Organization review in Geneva in December. The Wall Street Journal reports:

Struck on the eve of a two-day summit between Mr. Obama and Chinese President Xi Jinping, the deal would lend momentum to talks that analysts expected would yield little in the way of major breakthroughs.

“This is encouraging news for the U.S.-China relationship,” [U.S. Trade Representative Michael] Froman said.

The U.S., the European Union and Japan have been pushing to update the deal, which was originally struck in 1997 to curb tariffs in the technology industry. But China had been reluctant to go along, negotiators say, in part because of its desire to protect and build its semiconductor industry. […]

Talks over the technology pact had nearly broken down over its scope, Mr. Froman said, but “last night we reached a breakthrough.” The agreement, while not final, would eliminate tariffs on sales of roughly $1 trillion and could generate as many as 60,000 U.S. jobs, he said.

The U.S.-China deal would be presented to the 54 economies involved in the ITA negotiations in Geneva to get their signoff. U.S. officials said they believe they are all expected to do so because Chinese opposition has been seen as the main obstacle and the U.S. has already consulted with other nations.

Prior to the agreement, attempts to forge a pact had been held back for more than a year by China’s refusal to agree to terms that would open up trade on, among other key products, high-tech medical gear like MRI machines and the parts for GPS devices. China’s turnaround on this point is a major breakthrough for opening up global trade. It’s also a further sign that China is making a concerted effort to develop a lower profile in the region and the world. It hasn’t changed the way it views itself; nor has it modified its ambitions for its future. It’s still a rising power that seeks to establish itself as a regional hegemon and a preeminent world superpower, but it is attempting to pursue this revisionist agenda with a softer touch.

The powers that be in Beijing are no fools. If they are changing up their tactics, they are doing so because they are worried that more assertive revisionist policies might provoke economic and military pushback in the region and throughout the world.

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  • Jacksonian_Libertarian

    I don’t think you can take this as a demonstration that China is changing tactics. I still see Chinese belligerence and territorial ambition on all of China’s borders. If it’s signing on to this trade agreement it’s doing so because it feels that if it doesn’t, it will be left outside of an agreement that is going to happen with or without them, and so lose the entire market to competition from cheaper non-tariffed nations.

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