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U.S. and China Sign on The Dotted Line for Phase One Deal

January 15, 2020

The U.S. and China signed their Phase 1 deal moments ago and released the text of the agreement.Read the AgreementAmong the topline items included in the agreement:Intellectual PropertyThe deal details commitments on intellectual property including trade secrets and confidential business information. The Chinese agreed to enumerate acts constituting trade secret misappropriation, including through electronic intrusion, breach of duty, and unauthorized disclosure. China also commitment to clarify "great loss" as a threshold for criminal enforcement.The U.S. and China also agreed to "strengthen cooperation" and "combat infringement and counterfeiting in the e-commerce market." As a part of this, China committed to require expeditious takedowns, extend the deadline to file a complaint to 20 days, and ensure validity of takedown notices and counter-notifications. China must also provide increased personnel to inspect, detain, seize and execute customs' enforcement against counterfeit and pirated goods.Within 30 working days, China is required to promulgate an Action Plan to implement the measures agreed to in the Phase One Agreement.AgricultureThe U.S. and China set out a number of provisions related to agriculture, including specific sections on a number of commodities, including:

Additionally, the agreement addresses agricultural biotechnology and requires China to accept product approvals on an on-going basis.Technology TransferThe U.S. and China agreed, among other provisions, that:

CurrencyThe U.S. and China agree to "respect" the other's autonomy in monetary policy in accordance with its domestic law, while also agreeing to honor currency-related commitments undertaken in G20 communiques.The countries agreed that each should "achieve and maintain a market-determined exchange rate regime" and "strengthen underlying economic fundamentals, which reinforces the conditions for macroeconomic and exchange rate stability." And agree to refrain from competitive devaluations and not target exchange rates for competitive purposes.For enforcing this section, the parties agree that issues should be referred to the Secretary of the Treasury (U.S.) and the Governor of the People's Bank of China. If there is failure to reach a resolution in a dispute, the parties can request that IMF initiate formal consultations and provide input.Ultimately, there is very little new in this section.Expanding TradeThe deal contains a number of details on purchase commitments from the Chinese government. The numbers below reflect an increase over the 2017 purchases:

The deal includes a list of tariff codes for products in specific sectors that could be purchased to meet the above commitments.Enforcing the AgreementThe Agreement sets up mechanisms for the U.S. and China to evaluate the progress of the agreement and to resolve disputes. The countries will create a Trade Framework Group to discuss implementation of the agreement, including problems and future work. Meetings by the Group will be held every 6 months.Additionally, the deal establishes a Bilateral Evaluation and Dispute Resolution for each party; in the U.S., it will be headed by a designated Deputy USTR and in China will be headed by a designated Vice Minister. Parties can submit an appeal to the particular office, followed by the other party conducting an investigation. If a resolution cannot be reached, a complaint would be elevated to a meeting between the United States Trade Representative and the Vice Premier.

Casie Daugherty

Casie leads the firm’s trade practice, where she covers client needs in relation to Section 301, Section 232, NAFTA/USMCA, CFIUS, and other trade-related actions.

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