China to reduce import tariffs on key commodities

Beijing – China is to reduce tariffs on more than 850 goods including frozen pork, hi-tech components and vital medicines, in a move billed at opening the economy to freer international trade.

The reduction has been approved by the State Council and will come into effect on January 1. While there has been no new tariff rate announced for the products, a statement from the State Council’s Tariff Commission said that it will bring them below the “most favoured nation” rates at which China now trades with many of its partners.

A reduction in the pork tariff is unsurprising, given the fact that African swine fever has decimated China’s own reserves of the country’s most popular meat. Diabetes and asthma medicines, semiconductor testing and taping equipment, memory chips and aluminium valves will also see their tariff rates slashed.

While the United States is not mentioned in the statement, the language used evokes the statement made at a press conference in Beijing on Friday 13 December, at which senior officials announced a phase one trade deal with the US. Beijing has repeatedly called for trade negotiations with Washington to yield a “win-win” deal.

Monday’s statement said that “the above-mentioned adjustment measures are conducive to reducing import costs, promoting the orderly and free flow of international and domestic trade, and promoting the establishment of a new system of a higher level, open economy”.

It added that China would “accelerate the construction of high-standard free trade zones” that are “conducive to sharing development results with other countries and regions, and creating a new situation in international trade that is open to cooperation, inclusive, and sharing a win-win situation”.

The move will reduce tariffs on 176 information technology products from July 1, 2020, while the statement also said that China will continue to reduce tariffs for those nations with which it has free trade agreements, as well as those which have signed on for its Belt and Road infrastructure initiative.

Monday’s announcement came after China had announced further progress in reaching a trilateral trade agreement with Japan and South Korea, and also as it moves closer to finalising the Regional Comprehensive Economic Partnership (RCEP) – a pan-Asian trade deal that will also bring large levels of tariff reduction.

After Sunday’s trilateral talks in Beijing, ministers did not announce any concrete results, but they stated their willingness to continue discussions on the RCEP – which also includes the Asean nations, Australia, India and New Zealand – as well as the three-way free-trade deal.

Chinese Commerce Minister Zhong Shan said China was willing to work with South Korea and Japan to “oppose unilateralism and protectionism” and to support a global multilateral trade system. He added that the three countries should “jointly maintain regional peace and stability and promote an open world economy”.

Despite its fractious trading relationship with the US, since the beginning of the trade war in July 2018, China has gradually been reducing import tariffs on other nations. Research from the Peterson Institute of International Economics published in June found that while “China has increased tariffs on US exports to an average 20.7 per cent”, it has reduced tariffs on competing products imported from everyone else to an average of only 6.7 per cent”.China has yet to confirm the details of the content of the phase one deal.

The Office of the US Trade Representative released a fact-sheet claiming that China had agreed to buy an additional US$200 billion of American goods over two years, including US$80 billion in farm produce.

There has been much subsequent speculation as to how China would meet these quotas, and whether it would incur the anger of other trading nations, since there would undoubtedly need to be import substitution to meet such lofty goals.

On Friday, US President Donald Trump took to Twitter to state that he “Had a very good talk with President Xi of China concerning our giant Trade Deal.”

A White House official confirmed that the two leaders spoke on Friday morning, while Chinese state broadcaster China Central Television said the phone call was at Trump’s request.

China’s Xinhua News Agency added on Saturday that during the call Xi told Trump that China is deeply concerned about “negative words and actions” by the US on issues relating to Taiwan, Hong Kong, Xinjiang and Tibet.

“Xi noted that the US’ behaviours have interfered in China’s internal affairs and harmed China’s interests, which is detrimental to the mutual trust and bilateral cooperation,” Xinhua said.

China announced last Thursday, meanwhile, that it would exempt six US chemical products from additional tariffs for a year in a goodwill gesture after Beijing and Washington agreed to a phase one deal last week.  (SCMP)