The importance of dispute resolution in China-U.S. phase one deal
By Zheng Junfeng
Do you remember how long it took for China and the U.S. to reach their phase-one deal? Thirteen rounds of negotiations over 23 months.
So, apparently, no one wants to go through that again. But what if things go wrong in the future, which is very likely? That's why there's a mechanism in the phase-one deal called the Bilateral Evaluation and Dispute Resolution chapter.
This one is unique in that it isn't about "you buy me this and I buy you that." It's about preventing a trade war from happening again. It has just six pages of a very clear and straightforward process for resolving disputes.
There will be a working office to handle day-to-day matters. The office is called the Bilateral Evaluation and Dispute Resolution Office, to be set up by both countries. If one side feels the other isn't playing fairly, it may submit an "appeal" to the other side. Please note, there's no third party to help out, just China and the U.S. If the standing office can't reach a resolution, the dispute is elevated to a higher level.
The friction will then be decided by a designated Chinese Vice Minister and a deputy U.S. trade representative. If there's still no resolution, then the dispute is raised to the highest level.
A designated Chinese vice premier and the U.S. trade representative will give the final call. If no resolution is achieved, the complainant may take action based on facts provided during the consultations. Those actions could include suspending an obligation and adopting a remedy to prevent an escalation of the situation.
So, if one side takes remedial action, the agreement states that the other side is forbidden from taking counter penalties. Instead, the only remedy is to withdraw from the agreement, which either party can do with a 60-day written notice. It could mean a new trade war if it reaches that stage.
The dispute settlement chapter establishes an arrangement to allow the parties to resolve their disputes in a fair manner. It makes a new trade war difficult to initiate. And it gives both China and the U.S. the same level of authority over their own issues.
However, successful enforcement of the trade deal will still depend on the good-faith efforts of both sides, because the two countries' economies and trade relations are very complicated and no agreement can be 100-percent airtight.