The United States and China have been engaged in a heated trade war in recent years, with both countries imposing tariffs and other trade restrictions on each other`s products. In an effort to ease tensions and reach a trade agreement, the two nations signed a deal in January 2020. However, the agreement includes an “out clause” that has the potential to hinder the progress made.
What is the Out Clause?
The out clause, also known as the “reviews and consultations” clause, allows either the United States or China to withdraw from the agreement if they feel that the other country is not living up to their end of the bargain. Specifically, the clause allows for “reviews” of the agreement every six months to determine if it is being followed. If either country feels that the other is not following the agreement, they can request “consultations” to attempt to resolve the issue. If those consultations fail, either country can withdraw from the agreement with 60 days` notice.
Why is the Out Clause Important?
The out clause is important because it gives both the United States and China some leverage. It allows them to monitor each other`s compliance with the agreement and to withdraw from the deal if they feel that the other party is not holding up their end of the bargain. This gives both countries some degree of protection against the other`s potential bad faith.
However, some experts warn that the out clause could hinder the progress made in the trade agreement. By allowing either party to withdraw from the agreement, it creates a level of uncertainty and instability that could undermine the positive effects of the deal. Additionally, the clause creates an incentive for both countries to bargain aggressively, as they know that they can withdraw from the deal if they don`t like the terms.
The US-China trade agreement out clause is an important feature of the deal, as it provides both countries with some level of protection against bad faith. However, experts warn that it could also hinder progress and create instability. Ultimately, it will be up to both nations to honor the agreement and work together to resolve any issues that arise along the way. Only time will tell if the out clause will prove to be a useful tool or a hindrance to the success of the trade deal.