Update | Beijing, US reach trade deal to boost American imports to China in wake of Xi-Trump summit
Agreement will help reduce the huge US trade deficit with China
The United States has reached a trade agreement with Beijing that will boost shipments of American liquefied natural gas, beef and other products, as well as improve its market access of financial services to China.
The accord follows pledges by US President Donald Trump and Chinese President Xi Jinping to address a US$350 billion trade imbalance in China’s favour by coming up with concrete measures within 100 days of the two leaders’ summit in Florida last month.
US Commerce Secretary Wilbur Ross hailed the agreement as “a herculean accomplishment” forged in record time.
“This is more than has been done in the whole history of US-China relations on trade,” Ross told reporters on Thursday evening at the White House. “Normally trade deals are denominated in multiple years, not tens of days.”
US financial industry shares a large portion of this agreement on market access.
US credit rating services, electronic payment services and bond underwriting business are now all allowed in Chinese market.
The US would also allow American companies to ship liquefied natural gas to China.
Regular LNG exports from the US would give the country a chance to supply China with a fuel that is in high demand because it burns cleaner than coal and oil and is therefore becoming the fuel of choice for electricity generation, along with renewable sources. The LNG export market is currently dominated by Australia, Qatar and Malaysia.
Under this agreement, China will accept beef from the US into the Chinese market, effectively ending the 14-year ban on American beef after an outbreak of mad-cow disease in US in 2003.
Reciprocally, US will allow Chinese cooked chicken to sell in the American market.
The agreement also gives the green light for US biotechnological products to export into China.
Chinese finance vice-minister Zhu Guangyao and commerce vice-minister Qian Keming were due to hold a press briefing in Beijing at noon on Friday on the trade deal.
In the weeks since Trump’s summit with Xi, the US president has dropped accusations that Beijing pursues unfair trade and currency policies that undermine US manufacturers and lead to higher unemployment, suggesting the improvement in relations since the first meeting between the two leaders was largely symbolic.
Scott Kennedy, from the Centre for Strategic and International Studies, told the South China Morning Post that the two nations had already started negotiations and met multiple times.
The White House aims to seek reciprocal market access in China for US companies, especially in the agriculture and finance sectors, according to multiple sources with knowledge of the plan, as reported by the Post on May 9.
“Trump is not interested in China going into US market, but US going into the China market,” said Douglas Paal, vice-president for studies at the Carnegie Endowment for International Peace, a Washington-based foreign policy think tank.
China’s natural gas consumption growth, pegged at 5.4 per cent a year, outstrips domestic production.
The share of imported gas in the nation’s total consumption of the energy source may rise to nearly 40 per cent by 2035, up from 30 per cent in 2015, according to the 2017 BP Energy Outlook report.
Imports of LNG to China, the world’s largest energy consumer, rose to 33 per cent in 2016, according to customs data. China imported 26.1 million metric tonnes of the fuel last year, up from 19.6 million in 2015.
Houston, Texas-based Cheniere Energy Partners is America’s only major LNG producer, having completed a major LNG export terminal on Louisiana’s Gulf Coast last year.
Liquefaction and export terminals are, however, under construction in other parts of the country.
The expansion of the Panama Canal last year allows the waterway to accommodate giant tankers that carry LNG between continents. It makes shipments of the chilled fuel to China feasible for LNG projects underway on the east coast of the US.
Highlights of the trade deal
- United States will welcome Chinese companies negotiating agreements to buy US-produced liquefied natural gas. The Energy Department has already authorised the shipment of 19.2 billion cubic feet per day of natural gas exports to China and other interested countries.
- Beijing will allow US-owned card payment services to begin the licensing process in a sector where China’s UnionPay system has had a near monopoly.
- Foreign-owned firms in China will be able to provide credit rating services.
- China will allow US companies to do bond underwriting business in China.
- China will end restrictions on beef imports. China imposed a ban on American beef in 2003 after a case of mad-cow disease, a ban that has remained in place despite extensive efforts by the Bush and Obama administrations to get it removed.
- China will streamline the evaluation of pending US biotechnology product applications.
- US will facilitate the entrance of Chinese banks into the US banking market.
- US will allow the sale of cooked Chinese poultry
Additional reporting by Associated Press, Reuters
