The U.S. on Tuesday woke up to the news that for the first time in 17 years, a set of major global trade tariffs are likely to be eliminated. In a deal that is expected to stimulate up to $1 trillion in additional trade and create up to 60,000 new U.S. high-tech jobs, China has agreed to drop protective tariffs on semiconductors, Global Positioning System equipment, medical technology, computer software, and more.
The deal updates the Information Technology Agreement, a global trade pact that has been in place since 1998, and that was negotiated at a time when much of the technology it covers was either in its infancy or had not yet been developed.
The deal is viewed as a major triumph for U.S. Trade Representative Michael Froman, who late Monday said, “This is encouraging news not just for the U.S.-China trade relationship, it shows that the U.S. and China work together to both advance our bilateral economic agenda, but also to support the multilateral trading system.”
Negotiated on the periphery of the Asia-Pacific Economic Cooperation Summit in Beijing, the deal is also a small bit of good news for President Obama, who in the past week has faced the one-two punch of mid-term elections that gave control of the Senate to the Republican Party and the Supreme Court’s decision to hear a major challenge to his signature domestic policy achievement, the Affordable Care Act.
The deal will have to be ratified by the broader World Trade Organization at a meeting in Geneva next month, but as China’s objections were largely viewed as the primary obstacle, it is expected to pass easily.
On Tuesday, Obama predicted that the deal “will contribute to a rapid conclusion to the broader negotiations in Geneva.”
Obama is scheduled for bilateral talks with Chinese Premier Xi Jinping over the two days following the APEC summit. Whether the trade deal will prove a catalyst to further breakthroughs in an increasingly fraught relationship is unclear.
Obama has, with little recent success, pursued similar trade deals in the past, putting himself in opposition to some members of his party. Many Democratic politicians, supported by unions, object to eliminating U.S. tariffs on good coming from countries that protect their domestic industries through policies that artificially drive down prices.
The elimination of China’s protective tariffs, though, should make almost everyone happy, mainly because the tariffs in question hit U.S. high-tech businesses hard, and do little to protect U.S firms.
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