China Tries to Ease Concern U.S. Trade Deal Hurts Other Nations

Dandan Li, Crystal Chui and Bryce Baschuk

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Chinese Vice Premier Han Zheng told the World Economic Forum that the country’s trade deal with the U.S. won’t hurt rival exporting nations as complaints mount from governments that were left out of the agreement.

In the most high-profile remarks on the country’s economic policy since the accord was signed last week, Han said that its commitment to buy more from the U.S. is in line with its World Trade Organization obligations and won’t squeeze out other imports. Han also pledged to lower barriers for foreign investors as he set out the case for China’s engagement with the global economy.

“China will open its door wider,” Han told an audience in Davos, Switzerland. “Though facing some protectionism from some countries, the determination to open up will not waver.”

The speech comes less than a week after Chinese President Xi Jinping sealed a “phase one” deal intended to de-escalate a trade war with U.S. President Donald Trump. The accord saw China commit to crack down on the theft of American technology and corporate secrets by its companies and state entities, while outlining a $200 billion spending spree to try to close its trade imbalance with the U.S.

“The phase-one trade deal is good for U.S., China and the world,” Han said. “China’s increasing purchases of U.S. goods are in accordance with WTO guidelines and will not impact its imports from other countries.”

Han made the comments just as Trump gave his own speech in Davos, in which the U.S. president claimed credit for overseeing an economy enjoying its longest expansion yet, with an unemployment rate that fell to a five-decade low after tax cuts, deregulation and improved trade deals. He also spoke of his close relationship with Xi.

“He’s for China and I’m for the U.S., but other than that, we love each other,” he said.

Under the agreement, China will boost purchases of U.S. manufactured goods, agricultural products, energy and services over the next two years. Critics say such pre-determined demand can have adverse consequences elsewhere.

‘Managed Trade’

”The real problem with managed trade is that it may divert, rather than expand, international commerce,” Chad Bown, a senior fellow and trade expert at the Peterson Institute for International Economics in Washington, said in a report released Tuesday. “For example, China could purchase more American soybeans by cutting back on imports of oilseeds from Brazil.”

Germany’s Kiel Institute for the World Economy said China’s pledge to boost American imports could end up costing the European Union about $11 billion next year. “If trade costs and hence relative prices do not change, Chinese imports from the U.S. must come at the expense of third countries,” the institute said in a study published this week.

Last week, EU trade commissioner Phil Hogan said his team will scrutinize whether China’s pledge is allowed under the WTO.

“We haven’t analyzed the document in detail, but we will and if there’s a WTO-compliance issue of course we will take the case,” Hogan told a conference on Thursday in Washington.

Separately, Australia is pushing China for the same dairy concessions that the U.S. received, according to the Sydney Morning Herald. As part of phase one of the deal, the U.S. secured regulatory breaks on dairy products shipped to China, barriers that have hampered Australian exporters, the newspaper reported last week.

To contact the reporters on this story: Dandan Li in Beijing at dli395@bloomberg.net;Crystal Chui in Zurich at tchui4@bloomberg.net;Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Ben Sills, Brendan Murray

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