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Coronavirus May Delay Hard-Fought U.S. Trade Wins in China

WASHINGTON — The rapidly spreading coronavirus could claim one more victim: the United States-China trade deal.

The virus, which has killed more than 360 people and sickened thousands, is taking a heavy toll on China’s economy by halting factory work, grounding flights and disrupting supply chains. It is also likely to slow China’s progress in meeting the commitments it agreed to as part of the initial trade deal that the Trump administration signed with Chinese officials last month.

Under the terms of the agreement, China has pledged to purchase over the next two years an additional $200 billion of American goods, including soybeans, machinery and energy products. In order to reach those lofty sums, Chinese companies would soon need to begin purchasing large amounts of American products.

The Chinese government is also supposed to act quickly to open its markets for American agricultural and financial firms, making major reforms to those sectors within months.

But with factories and stores throughout China shuttered and government officials focused on containing the virus, Beijing will have less capacity to meet President Trump’s terms, analysts say.

“It could be problematic, particularly for manufacturers,” said Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics.

She pointed to one example: Grounded flights and less tourism will weigh on Chinese airlines, potentially reducing their purchases of new American aircraft this year.

“How is the U.S. going to handle this? We don’t really know,” she said.

Karthik Natarajan, a supply chain expert at the University of Minnesota, said the closing of cities and factories was severely affecting manufacturing and travel.

“Parts of the deal are set to go into effect by mid-February, but with the Chinese government intently focused on responding to the outbreak, developing action plans to meet the trade deal commitments might take a back seat,” he said.

One of the final sentences of the Phase 1 trade deal may prove to be key. The provision calls for consultations between the parties if “a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement.”

But even with a deadly disaster looming, China’s failure to meet its commitments may create some opposition in the United States, potentially returning the countries to their rockier relations before the signing of the trade deal.

Economists have predicted a drag on global growth from the virus, at least in the short term. In the United States, Goldman Sachs analysts estimate a 0.4 percentage-point reduction in first-quarter economic growth, though that effect is likely to fade.

Those costs could quickly outweigh the economic benefits of the trade agreement. While the Trump administration has touted big economic gains from the pact, economists’ forecasts have been modest, since the deal leaves tariffs in place on more than $360 billion of Chinese goods.

Privately, some Trump administration officials say that China may use the virus as an excuse to delay meeting its commitments, in hopes that Mr. Trump will ultimately be voted out of office this year.

Some in China have reacted negatively to the Trump administration’s decision to restrict travel between the countries, including barring entry to all foreign nationals who recently traveled in China.

In a note to clients, Ian Bremmer, the president of Eurasia Group, said that the Chinese government had found the American move to shut its borders “unnecessarily provocative, and it adds a sour tone on the back of the recently agreed Phase 1 trade deal,” he said.

Michael Pillsbury, a China expert at the Hudson Institute who advises the Trump administration, said he supported the emergency measures and that they might be escalated based on the situation.

He added that the administration would have to carefully weigh the potential consequences of the virus against upsetting the relationship with China.

“We need to balance a defensive concern with limiting a pandemic that can harm our own economy against the desire by some to be overzealous,” Mr. Pillsbury said. Such a response could “provoke paranoia among China’s hard-liners, who already claim that the U.S. is ruthlessly exploiting the health crisis,” he said.

Comments by some American officials have stoked those concerns. In an interview with Fox Business on Thursday, Commerce Secretary Wilbur Ross appeared to describe the virus as presenting a possible economic opportunity for the United States.

While Mr. Ross expressed sympathy for the victims of the coronavirus, he said it would probably facilitate the return of labor to the United States.

“It does give businesses yet another thing to consider when they go through their review of their supply chain,” he added. “So I think it will help to accelerate the return of jobs to North America.”

Ms. Lovely said the virus, like the American tariffs on China, has been encouraging companies to examine their supply chains and invest in manufacturing some of the same products outside China, so they are not completely dependent on one source. But often these factories are not returning to the United States.

“We see a pickup in trade shares from Mexico and from Vietnam, but also some higher-income countries like South Korea and Japan,” she said.

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#Brexit – UK open to looser ‘Australia-style’ trade deal with EU: source

“There are only two likely outcomes in negotiation – a free trade deal like Canada or a looser arrangement like Australia – and we are happy to pursue both,” the source said.

Johnson is due to give a major speech on trade on Monday, following Britain’s departure from the EU on Friday after nearly 50 years of membership.

Previously Johnson has said his main goal is to reach a Canada-style trade deal with the EU before an 11-month transition period expires at the end of the year, after which British firms would face tariffs to sell goods to the EU.

But Johnson has also said Britain will not commit to continue following EU rules after the transition period, and Saturday’s remarks suggest he is growing less willing to make the trade-offs that many businesses want to smooth a deal.

Canada does not follow EU rules, but some EU governments are reluctant to give Britain similar leeway to diverge on labour and environmental standards, given the much greater trade volumes involved.

In some areas, such as the minimum wage, maternity leave and the elimination of single-use plastics, British standards significantly exceed EU minimums.

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Boris Johnson, Jeremy Corbyn trade blame for London Bridge knife attacker’s release

Khan, who was freed on parole 11 months ago with an electronic tracking device on his ankle, began his attack Friday afternoon as he was entering a conference intended to rehabilitate violent offenders and terrorists. He stabbed at least five people before he was tackled by members of the public and shot dead by police. The queen honored the bystanders who intervened as heroes.

Police on Sunday named the second victim of Khan’s attack: Saskia Jones, 23, a volunteer with the Cambridge University program that hosted the conference in London. Police had earlier named Jack Merritt, 25, who worked for the program. Three other victims were in the hospital recovering from their wounds.

Prime Minister Boris Johnson, appearing on a BBC political affairs show, said “the reason this killer was out on the streets was because of automatic early release, which was brought in by a lefty government.” He was referring to the government of former Labour prime minister Gordon Brown, which ended in 2010.

Host Andrew Marr repeatedly challenged Johnson, reminding his guest — and viewers — that Johnson’s Conservative Party has been in power for nearly 10 years.

Johnson refused to concede any responsibility. Whatever the Tories failed to do in the past, his government will fix it if he wins a majority in the Dec. 12 elections, he said.

“I think it is ridiculous, I think it is repulsive, that individuals as dangerous as this man should be allowed out after serving only eight years, and that’s why we are going to change the law,” Johnson vowed.

Labour Party leader Jeremy Corbyn, Johnson’s principal opponent in the elections, called the government’s early release of Khan “a complete disaster” and called for a “very full investigation.”

In a speech in York on Sunday, Corbyn took aim at the cuts to police forces since the Conservatives came into power — a deficit of some 20,000 officers compared to years before.

“A failure to recruit has left huge staffing shortfalls and staff supervising more cases than ever expected, posing again a serious risk to our security,” Corbyn said. “You can’t keep people safe on the cheap.”

Into this febrile mix, President Trump is scheduled to arrive for a meeting of NATO leaders on Tuesday and Wednesday. Trump in the past has found it irresistible to wade into British electoral politics, and all sides expect him to do so again.

As Johnson, a Trump ally, was swatting back blame, the Justice Ministry revealed that 74 people convicted of terrorist offenses are living under supervision in British society.

The Sunday Times reported that Khan “had been granted permission by his parole officer to travel to London even though he was one of 3,000 extremists” on the MI5 “watch list.” The MI5 is Britain’s domestic intelligence service.

Ian Acheson, a former top counterterrorism official, wrote that he had warned Conservative officials for years that they were treating released terrorists with “jaw-dropping” naivete.

Corbyn, who has long spoken out against military action, said Britain’s foreign interventions have fueled conflict and brought terrorism to Britain.

He told supporters he had warned against the 2003 invasion of Iraq, and “we are still living with the consequences today.”

“The war on terror has manifestly failed,” Corbyn said. “Britain’s repeated military interventions in North Africa and the wider Middle East, including Afghanistan, have exacerbated rather than resolved the problems.”

Johnson has often accused Corbyn of siding with militant groups, such as Hamas and Hezbollah.

Opinion surveys of voting intent for the coming election have consistently shown Johnson’s Conservatives with a solid lead and clear path to majority government. But pollsters warn the electorate is still making up its mind — divided not only over parties and ideologies but Brexit — and they note that former prime minister Theresa May squandered her 20-point lead in days in the 2017 election.

Jo Swinson, the leader of the Liberal Democrats, accused Johnson of “politicizing” the terrorist attack, of turning it into a “distasteful” election issue.

Johnson said he would seek much tougher sentences for convicted terrorists.

“The suggestion that there’s some immediate law change, that you can do this with some tough rhetoric and, as he has done, link majority government to success in tackling terror, I just think it leaves a nasty taste in the mouth,” Swinson told the BBC.

Khan killed two of the very people who were tasked with helping him and other prisoners return to society as peaceful, productive citizens. Jones and Merritt were Cambridge graduates.

“What should have been a joyous opportunity to celebrate the achievements of this unique and socially transformative programme, hosted by our Institute of Criminology, was instead disrupted by an unspeakable criminal act,” university Vice Chancellor Stephen Toope said in a statement.

David Merritt, Jack’s father, described his son as a “beautiful spirit” who “always took the side of the underdog.”

He said his son would “not wish his death to be used as the pretext for more draconian sentences or for detaining people unnecessarily.”

Shami Chakrabarti, a top member of the Labour Party and an attorney, told the BBC, “I’m not prepared to say that any political party could have prevented what happened on Friday.”

Karla Adam contributed to this report.

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