Trade Resolution with China

Susan Jung |

It appears as if Phase 1 of the United States China trade agreement is in place. As details continue to emerge, it is clear this is merely a first step toward resolving the long-held disputes between the two countries. It does appear as if additional agricultural products will be purchased and some intellectual property protections will be instituted in China to protect American companies.

What this deal is not is a comprehensive trade solution. It is merely a first step that will require ongoing discussions between the two countries if meaningful trade reform is to occur. Reportedly, China is pushing for a fast second phase agreement, but we shall see how that proceeds particularly in an election year here in the United States.

One area that we were pleased to see progress in was the disagreements around intellectual property protection. Technology transfers have been required admission ticket for companies attempting to do business in China. That appears to be somewhat addressed in this first phase of the trade agreement. For sure, there is more to be done. In a recent Reuters article, this was briefly mentioned as one component of the trade agreement. You can read that excerpt below. 


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The deal includes stronger Chinese legal protections for patents, trademarks, copyrights, including improved criminal and civil procedures to combat online infringement, pirated and counterfeit goods.

The deal contains commitments by China to follow through on previous pledges to eliminate any pressure for foreign companies to transfer technology to Chinese firms as a condition of market access, licensing or administrative approvals and to eliminate any government advantages for such transfers.

China also agreed to refrain from directly supporting outbound investment aimed at acquiring foreign technology to meet its industrial plans — transactions already restricted by stronger U.S. security reviews.

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Source: December 13, 2019 Reuters article by David Lawder, Andrea Shalal and Jeff Mason 

As you know, I’ve been predicting for some time there would be an agreement. I continue to believe that both countries will benefit from reasonable trade policies. I further believe that China is highly motivated to strike a deal as their economy continues to slow. Phase 2 is the next logical step and one hopes that further progress will be made in addressing outstanding issues.

As we make investment decisions, we carefully examine trade policy as well as the impact of that policy on investments we make in portfolios. It’s fair to say that our outlook is impacted by our direct research on the basis. How we are currently invested reflects our perspective on global trade. Our entire investment team assesses and monitors these conditions.

If you have any questions about this information, please let us know. Always happy to help or answer any questions.

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