Let’s Play A Little Game: If You Were Visiting From Another Planet, And Read The Following Statement, Which Country Would You Think Was The World Leader?
“To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.”
Putting that aside, the joint U.S./China Statement on trade, released this weekend after weeks of negotiation, does almost nothing to address areas of greatest concern to most U.S. corporations. And instead the White House backs away from an incipient trade war in exchange for murky promises.
Trump himself has repeatedly identified protection of intellectual property rights as one of the biggest trade issues between the U.S. and China, with U.S. companies losing out on as much as $300-billion in revenue. And he was completely right about that. And he also repeatedly promised action on that:
(BTW the U.S. trade deficit with China was $375-billion last year, of $566-billion total).
So let’s see what the new trade agreement with China being widely trumpeted by the White House says about fixing the intellectual property problem:
“Both sides attach paramount importance to intellectual property protections, and agreed to strengthen cooperation. China will advance relevant amendments to its laws and regulations in this area….”
If that sounds suspiciously to you like a lot of words strung together that mean nothing: yes. Trump’s “deal” with the Chinese to avert a trade war doesn’t address intellectual property theft in any meaningful way at all.
Here’s a text of the entire statement, courtesy of the Washington Post’s Heather Long on Twitter (click on the graphic for a larger image):
China could, and probably will buy a lot more oil and agriculture products from the U.S., and that could happen pretty quickly. And Treasury Secretary Steve Mnuchin is pushing to put another range of U.S. goods on the table: according to the New York Times, he’s in favor of relaxing restrictions on sales of advanced electronic products and technologies. The Defense Department doesn’t agree. Those products have traditionally been sharply restricted on the grounds of national security issues, despite China continually pushing for expansion of what they’re allowed to purchase. And in order for Trump to try to meet his specified numbers, China may now get more access. That’s despite repeated evidence of misbehavior, such as the widely-reported case of cellphone maker ZTE which sold to North Korea and Iran, was caught, and then did it again. Now U.S. negotiators are saying ZTE’s management will have to be overhauled before the U.S. potentially removes sanctions. Guess what? They’ve done that before too.
Trump had demanded China agree to reduce their surging trade surplus with the U.S. by $200-billion dollars. So when the joint statement was first released, Trump’s Chief Economic Adviser, Larry Kudlow, might’ve tried a little sleight of hand and announced China had agreed to buy $200-billion more in American goods. Which is completely different than reducing the trade surplus by $200-billion. (China pledging to buy more from the U.S. — which would still be great — could easily have zero impact on the trade surplus if the U.S. continues to buy more from China too).
In fact, the $200-billion dollar number appears nowhere in the joint statement, and Chinese officials say they never agreed to that number. Which makes it seem even more like it was something concocted to mislead people into thinking Trump got what he demanded.
Or at least it was incredibly important for somebody to keep the $200-billion number in the air as long as possible in some context in order to appease the President. And it might’ve successfully masqueraded as a “win” for Trump had the Chinese government not quickly pointed out there is no dollar figure at all mentioned in the joint statement, after which the U.S. backed off.
Now all the White House is saying is Commerce Secretary Wilbur Ross (who is not without talents) is going to be spending a lot of time in Beijing hammering out specifics. Which is a good thing: talking is always good. Chinese media quotes that country’s chief trade negotiator, Liu He, saying “the two countries should properly handle their differences through dialogue and treat them calmly in the future”. We wonder how that: a Chinese official telling Trump to “calm down”, will go over with the President.
Don’t get us wrong: we’ve been preaching for months that a trade war with China would be horrible for the U.S. economy, so the fact that that’s been averted (at least temporarily) is a good thing. It’s also a sign the few pragmatists left in the Trump White House (many of whom are involved with trade negotiations) can still prevail vs. newly-empowered fringe characters who want to go to the mat with China and everyone else. Republicans also never lined up behind Trump on this issue: they are too concerned about the midterm elections, and the very real possibility there could’ve been tons of grain rotting in silos by then if China was refusing to buy it.
At the same time, in terms of what Trump vowed to accomplish, this is not a “win”, it’s a capitulation.