Hopes High for Interim US-China deal

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By target2020 October 12, 2019 10:52

Chinese and U.S. trade officials resumed bargaining efforts as optimism grew for the two sides to reach an interim US-China Deal and mark a pause in their increasingly damaging trade war.

Positive progress

  • China’s securities regulators set a timetable for removing foreign ownership limits in finance companies in 2020 — helping attract foreign investment as China’s economy slows but also removing constraints on foreign capital.
  • Media reports have drawn the contours of a partial deal that, while not addressing Mr. Trump’s core grievances about China’s trade practices, would offer something for both sides.

Currency manipulation

  • China will continue to increase purchases of U.S. farm exports and pledge to refrain from currency manipulation while Washington will suspend a tariff increase.
  • China has so far cornered from Mr. Trump’s demands for profound changes in the way Beijing manages its economy.

China–United States trade war

  • The China-United States trade war is an ongoing economic conflict between the world’s two largest national economies, China and the United States.
  • President Donald Trump in 2018 began setting tariffs and other trade barriers on China with the goal of forcing it to make changes to what the U.S. says are  “unfair trade practices”.
  • Among those trade practices and their effects are the growing trade deficit,   the theft of intellectual property, and the forced transfer of American technology to China.

Interim US-China deal

Opportunity for India

  • Ongoing trade war may be an opportunity for India to reduce its trade gap with China.
  • India can export the surplus agricultural products such as soybean to China after a decrease in the export from USA.
  • India can become China’s software industry partner in place of the U.S.
  • India can export the demands of goods by the US after the restricted entry of Chinese goods in the US economy.
  • India may be able to increase its exports in textile, garments and gems and jewelry to US.

Threats for India

  • With India, the US has a trade deficit of $21.3 billion, which on the contrary is a trade surplus (FOREX earning) for India, which is at risk due to the ongoing trade war.
  • US wants duty reduction from India in Harley Davidson bikes, stents, knee implants, and medical devices and dairy and poultry products among others.
  • These pressures for duty reduction can affect domestic production.
  • India should remain cautious of China’s intention of dumping its overproduction of steel and aluminum due to restrictions imposed by the US.
  • India’s currency may further decline in value due to the ongoing trade war.

The Way Forward

Both the countries- US and China should hold talks and deliberate on a better course of action.

  • The settlement of disputes through international conventions and rules is the need of the hour.
  • WTO dispute settlement resolution mechanism should be approached instead of unilateral decisions.
  • India can derive maximum benefits from the opportunities created by the ongoing trade war between the US and China.
  • However, it should also remain careful and prepare for the challenges arising out of the trade war.

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target2020
By target2020 October 12, 2019 10:52