USCBC Officials Hopeful About Phase One Commitments Despite Worsening US-China Tensions

The worsening U.S.-China trade relationship is continuing to hurt U.S. companies, which are increasingly losing Chinese customers to European, Japanese and domestic Chinese firms, U.S.-China Business Council officials said. But despite the rising tensions, USCBC President Craig Allen said he is hopeful China will meet its phase one purchase commitments, and said the two sides should begin discussing phase two during an expected meeting between trade officials this week.

“There are a lot of problems -- many of which are COVID- or market-related -- but a commitment is a commitment,” Allen said, speaking to reporters Aug. 11 after the launch of the USCBC’s 2020 member survey. “We believe that the Chinese side can meet its commitments over time, and it’s not too early to look at phase two.”

Jacob Parker, USCBC senior vice president, said the council has heard mostly positive reports on Chinese implementation of the phase one deal. He said the U.S. has not “formally raised” issues about the purchases because China is “largely faithfully implementing” their commitments. Even so, Parker said, U.S. companies are “very unlikely” to raise an issue through the deal’s dispute resolution mechanism. “There are fears of retaliation domestically within China for doing so,” he said.

Despite the trade deal, U.S. companies continue to struggle to access the Chinese market due to trade tensions, the USCBC survey said. USCBC members affected by the trade war reported lost sales because Chinese customers increasingly view them as unreliable, Parker said, partly due to U.S. and Chinese retaliatory tariffs and U.S. export control changes.

“As a result, Chinese companies are beginning to diversify away from American products,” Parker said, “and European, Japanese and domestic Chinese companies are happy to take their market share.” Still, the majority of USCBC members answering the survey said they had no plans to leave China. “Once lost, market share is very difficult to regain,” Parker said.

Allen said U.S. companies also will be hit by President Donald Trump’s executive orders on TikTok and WeChat, which banned transactions with their parent companies (see 2008070024). Allen said the bans appear to be too broad and could affect U.S. companies that rely on WeChat as both a payment application and to engage with Chinese customers. The ban “would clearly have commercial implications,” Allen said.

He also said the move could invite unwanted retaliation. “If we single out individual companies,” Allen said, “we should anticipate that other governments will do the same for American companies.”

USCBC members are also paying close attention to risks associated with supply chains in the Xinjiang region, Parker said, which the administration has singled out for its forced labor and human rights abuses (see 2007010040). Parker said USCBC members want to avoid supporting oppression in Xinjiang but are struggling to conduct due diligence.

“Our members would like the ability to ensure that they can audit fully their supply chains in the Xinjiang region,” he said. “It's extremely difficult to get people into that region because of some of the challenges on the ground in China.” Parker urged the administration and Congress to work with China to allow audits of Xinjiang supply chains. “Only through government-to-government engagement can these channels reopen to ensure that supply chains continue to be free of forced labor,” he said.