China Trade Deal Inspires Caution, Skepticism
President Donald Trump and his aides have been trumpeting the first phase of what they claim is a game-changing trade deal with China.
The 86-page deal—expected to be signed in January after translation and review—reduces some tariffs and cancels plans for others, including $160 billion worth that were due to take effect December 15, but leaves many others intact. It kicks many important issues back to a Phase II process in the future, which some observers doubt will ever take place.
The South China Post derided the deal as a “soybean solution” designed to save Trump’s face with American farmers. Foreign Policy magazine said it is not the deal Trump campaigned on or promised. Some said it is not really a trade deal at all, but a purchase agreement with a few trade provisions attached.
The American Farm Bureau Federation cautiously welcomed the deal on its website as a good first step. But when asked about administration claims that China has agreed to buy $50 billion worth of U.S. farm products, AFBF trade economist Veronica Nigh cautiously said, “Given that’s such a large expansion over where we were previously, the list of products and the variety of trade between China and the U.S. would have to expand pretty significantly. When you look at the total of what China is buying from the rest of the world, there’s probably room there.” U.S. farm exports to China were $24 billion in 2017, before the trade war began, and it’s not clear that there is even that much demand in the Chinese market, especially given the swine flu that has drastically reduced Chinese swine herds. Former Farm Bureau official May Kay Thatcher told CNN, “I’m not really sure we can actually produce that much product to send. But I’m sure the agriculture industry would be more than happy to try.”
U.S. Agriculture Secretary Sonny Perdue said China has been reluctant to put that $50 billion promise in writing, however. We’ve seen agricultural purchase agreements before that didn’t happen or that dwindled into a few token buys. And what farmers really want is a return to a free market, not markets determined by government agreements.
China did recently pass a law, due to take effect in January, that will supposedly address forced transfers of intellectual property from foreign companies to China, a key demand of the U.S. and other countries whose companies have been operating in China. But as some have pointed out, this law was a separate development, not part of the trade deal itself.
Most observers are calling the China deal a cease-fire rather than a real resolution. In the short term, that may be enough to give the stock market a boost and allow Trump to claim campaign mileage.
More important, perhaps, was the U.S.-Mexico-Canada Agreement, announced the same day as the China deal. That’s partly because trade with the two neighbors combined is bigger than trade with China. It’s an updated version of the 1994 North American Free Trade Agreement (NAFTA) that eliminated trade barriers between the U.S., Mexico and Canada. Trump has touted it as a replacement for NAFTA.
It’s also because it’s the first significant substantive agreement Trump has worked out with Democrats in Congress since his election, despite the partisan bitterness of the impeachment hearings. Trade is one policy area where Trump has some real Democratic and union support, including on the tariffs against China.
To get that North American trade agreement, Trump had to make concessions to House Democrats and their labor union supporters, some of which have inspired criticism from his supporters.
Both sides can now claim the North American trade deal as an accomplishment as the 2020 campaigns heat up.
