As I explained here, I am skeptical about the enforcement part of the U.S.-China phase one trade deal. In my view, when one party believes another party is in violation, it really helps to have a neutral dispute settlement process under which a panel can issue a ruling that the second party is or is not in compliance. If it's just one side accusing the other side, and then taking action on the basis of its internal assessment, the accused party may just say that it thinks it is, in fact, in compliance. You might get a tariff war out of all this, but you are unlikely to get compliance.
The China phase one deal, however, has a mechanism for consultations, and notes that one side can impose tariffs or other penalties if it thinks the other side is not in compliance, but does not offer neutral dispute settlement. For that reason, I'm not sure how enforceable it is.
Regardless of my skepticism, I would be curious to see how disputes under the phase one deal play out in practice. Here's something from a letter by three Michigan members of Congress to U.S. Trade Rep. Lighthizer that could turn into the first case study:
The “Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China” (Phase I China Deal) states that China has committed to purchase solar-grade polysilicon. This was welcome news to Hemlock Semiconductor (HSC) in Michigan, which manufactures solar-grade polysilicon. Unfortunately, all indications show that China will not meet its commitments.
...
... we implore you to take additional enforcement action immediately to support solar grade polysilicon industry, including a formal request under Article 7.3 of the Agreement for specific information on the immediate steps that China will take to remove barriers to Chinese purchases of solar grade polysilicon. We greatly appreciate your dedication to trade enforcement. This is no different and we urge you to act now.
Article 7.3 is the step before actual "dispute resolution" in Article 7.4. It states:
Article 7.3: Requests for Information
A Party may request at any meeting, or prior to a meeting, information from the other Party regarding a matter relating to the implementation of this Agreement. The other Party shall provide a written response containing the requested information. In the event that a Party is not able to provide the requested information, the response shall contain a specific explanation of why the information cannot be provided within the time limit and the specific date when the information will be provided. Nothing in this provision shall obligate a Party to provide confidential information to the other Party.
The presidential election is just around the corner, which leaves us with two paths for this potential dispute. If Trump wins, would his administration pursue this under Article 7.3? And if they do, will we in the public hear much about it? If we are going to evaluate the effectiveness of this approach to dispute settlement, we really need to see the evidence.
If, of the other hand, Biden wins, what will he do with the phase one deal? Will he try to enforce commitments such as this one? Many people think that the phase one deal is not worth much (unrealistic commitments, weak enforcement mechanism), but it is out there as something that someone could try to use.
