US, China Agree Framework For Economic Relationship

by Leroy Baker, Tax-News.com, New York

16 February 2012

A joint fact sheet issued by the United States and China, during the visit of China’s Vice President Xi Jinping to America, affirmed that the two countries are promoting the healthy and steady development of the US-China cooperative economic relations “based on mutual respect and mutual benefit”.

This tallied with the thoughts of Xi Jinping's, expressed before his visit, on the recent trade disputes between the countries, when he observed that “frictions and differences are hardly avoidable in our economic and trade interactions. What is important is that we properly handle these differences through coordination based on equality, mutual benefit, mutual understanding and mutual accommodation. We must not allow frictions and differences to undermine the larger interests of our business cooperation.”

In the fact sheet, it was confirmed that the US and China would “commit to take comprehensive policy measures to achieve more balanced trade and expanded investment in each other’s economies”.

In particular, China is committed to policies to expand domestic demand, with increasing consumption as a strategic priority. “During the course of 2012,” it was disclosed, “China is to intensify structural tax reduction policies, including pressing ahead with the ‘VAT for business tax’ pilot reform and making adjustments in import tariffs at the appropriate time in order to increase consumption, accelerate development of the services sector, actively expand imports (and) promote balanced trade.”

In reaction to the recent disputes between the two countries concerning the renminbi exchange rate, which the US has said is too high and harming its trade prospects, China and the US reaffirmed their G-20 commitment “to move more rapidly toward more market-determined exchange rate systems and enhance exchange rate flexibility to reflect underlying economic fundamentals, avoid persistent exchange rate misalignments, and refrain from competitive devaluation of currencies”.

The two sides also affirmed that World Trade Organization rules should be strictly observed when initiating trade remedy investigations and imposing trade remedy measures, to prevent their abuse; and they are committed to sharing relevant information on their respective regional free trade agreements, including the Trans-Pacific Partnership and the China, Japan, South Korea free trade agreement.

China has reiterated its commitment to welcoming and encouraging foreign investment, and that technology transfer and technological cooperation shall be decided by businesses independently and will not be used by the Chinese government as a pre-condition for market access, although China wishes to increase imports from the US, in particular, of commercial high technology products.

For its part, the US will support hi-tech trade with China in commercial items "for civil end users and civil end uses". The US government has committed to process, in a timely manner, specific requests for items China wishes to procure that may be subject to export controls.

The US Administration has confirmed its programme to promote foreign direct investment in the US, including with resources dedicated to attracting Chinese investors and facilitating their investment. As part of this expanded effort, China-based US and Foreign Commercial Service staff are to take on increased responsibility for the promotion of investment by Chinese enterprises in the US.

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