Jan 23, 2020 12:46 PM

KU Trade Law expert sees phase one China deal as possible future template

Posted Jan 23, 2020 12:46 PM

By NICK GOSNELL

Hutch Post

HUTCHINSON, Kan. — The U.S. and China signed a phase one trade deal earlier this month, but it could mean more than just that, according to a trade law professor from the University of Kansas.

"The enforcement mechanism actually sets up two bodies," said Raj Bhala, Brenneisen Distinguished Professor of Law at KU and a Senior Advisor at Dentons. "One is a trade framework group to monitor the deal and make sure that both sides are complying with it. The second is an actual dispute settlement body, which is called the dispute resolution office and it will handle complaints from either side. It will process those complaints in about 90 days."

It's likely this agreement is an attempt by the U.S. to find other ways to reach trade agreements without using the World Trade Organization.

"It is a deal designed to solve the current problem with China for sure," Bhala said. "It also could be a template that the U.S. would look to, to the extent it had similar problems with other countries, though it's unlikely to imagine them being on the scale of those with China."

One of the biggest problems the U.S. has, the trade deficit, likely won't be fixed, even if the deal is followed.

"The U.S. trade deficit is approximately $400 billion with China," Bhala said. "If China met all of its purchase commitments, it bought $200 billion more of merchandise in the next two years and the U.S. and the U.S. imported not a penny from China, which, of course, is unrealistic, the trade deficit might at best be cut in half. It's not going to be eliminated."

Bhala also is dubious about the Chinese market's ability to ingest all of the imports it has promised to buy, particularly given its need for economic growth and jobs for its own people, but how close they can get remains to be seen.