December 18, 2019

China Trade Deal

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“The United States and China cooled their trade war on Friday, announcing a ‘Phase one’ agreement that reduces some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of American farm products and other goods.” Reuters

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From the Left

The left is critical of the deal, arguing that its predicted benefits are unrealistic and that it does not address the root issues.

“While Lighthizer and Trump are crowing about an expected $40 billion to $50 billion in annual agricultural sales, few analysts believe those numbers are realistic. The highest level of farm products the U.S. has ever exported to China was $26 billion in 2012. Plus, this first phase deal doesn’t do anything about the 25% tariffs already in place on the bulk of goods that China exports to the U.S. Considering this fact, how aggressive will China really be about pursuing increased agricultural purchases and intellectual property protections?”
Editorial Board, San Francisco Chronicle

“While the benefits of the trade war are speculative, its costs are real: The Tax Foundation estimates that Trump’s tariffs have cost Americans more than $88 billion so far, making this one of the biggest tax hikes in history. To cushion the blow, the administration gave $28 billion to farmers — twice the cost of the 2009 auto industry bailout… [Meanwhile] the real issues with China — from trade barriers to militarism in the South China Sea to human rights violations — remain unaddressed.”
Max Boot, Washington Post

“The deal on Friday pushes the thorny issue of China’s state support for its industries down the road, most likely complicating relations between the world’s two largest economies for years to come… It seems to affirm the belief, held by many Chinese officials, that Mr. Trump will back off from his trade-war threats if markets tumble, or if his supporters in agricultural states suffer too much. Even before Friday, Mr. Trump had delayed or canceled tariffs four times this year. Such policy shifts could ultimately encourage Beijing to draw out negotiations [for phase II] even further, to reach the best possible deal.”
Keith Bradsher, New York Times

“From what we can see, there is nothing in this tentative deal that wouldn’t have existed in the absence of the past two years of wrangling. Intellectual property reform has been a long-standing project for President Xi Jinping. China’s first dedicated IP courts were established back in 2014 and have generally dealt fairly with non-Chinese litigants. Penalties, the most glaring weakness in the post-2014 system, are already being toughened. Perhaps that’s come as a result of U.S. pressure — but it fits just as well with China’s domestic priorities… If little has been achieved when [US] leverage was at its highest, even less is going to be achieved once that leverage is ratcheted back down.
David Fickling, Bloomberg

“The way to compete with China on trade is neither sweeping tariffs nor the administration’s futile insistence that China change its fundamental economic model… [We need] public investment in research and production to increase our international competitiveness… A much more focused trade policy would do something our trade competitors, including China itself, does: to see around the next corner of global demand where no country has yet to establish a comparative advantage. China did so with the assembly of consumer electronics, but that’s a low value-added play. We should do so in green technology… There’s a clear path to quickly getting unstuck, one that evinces strong progressive values and an export strategy that supports American workers and their communities, not multinational corporations.”
Jared Bernstein, New York Times

“China presents a more formidable rival than the former Soviet Union ever was. Which means that allies matter more than ever to U.S. power. But unlike his predecessors in the age of the Soviet threat, Trump’s first move in his campaign against China was to sabotage the alliances that once enhanced U.S. leverage… The United States cannot impose its will on China. But it can work with others to write rules that China cannot afford to ignore.”
David Frum, The Atlantic

Others argue that “Biden was almost the only one on the stage who talked like a normal person. There was a point near the end of the debate when he was talking about getting men involved in stopping domestic violence and he said that we need to keep ‘punching’ at it… I knew that the twitterati and the analysts would tut tut. Ol’ Joe is just out of touch! He doesn’t know you can’t use words like that. Meanwhile, every non-political junkie watching the debate thought there was nothing wrong with this. Biden was just using ordinary language, not worrying too much if it was fully approved by the woke brigade.”
Kevin Drum, Mother Jones

From the Right

The right supports the deal as a modest but positive step, and argues that the US has the advantage in future negotiations.

From the Right

The right supports the deal as a modest but positive step, and argues that the US has the advantage in future negotiations.

“The trade deal that President Trump announced with China on Friday isn’t VE Day, but it’s still welcome economic news. The modest deal is essentially a detente that eliminates the damage from pending U.S. tariffs and even makes some progress on longstanding problems like China’s intellectual property theft… China is promising to stop conditioning business licenses or other permits on tech transfers to joint-venture partners… China is also promising new protections against patent theft—notably requiring Chinese firms that inform a U.S. competitor if it is selling a product that includes technology that might infringe on the U.S. firm’s patent. This so-called patent linkage will give U.S. firms recourse to object before they’ve lost market share to the cheating firm…

“Mr. Trump has done more to address Chinese cheating than any previous President, and he is smart to step back and test if China will honor these new commitments. The deal will also help China’s reformers, who want to make these policy changes to overcome its own many economic weaknesses. If China’s mercantilists block reform, Mr. Trump or the next President can revisit the terms. Mr. Trump is showing good faith in giving China a chance to show it can play by the rules of honest global trade.”
Editorial Board, Wall Street Journal

“This looks like a win… Politically, the timing of this is obviously good for the president. He can claim another win on trade just two days after a US-Mexico-Canada trade deal to replace NAFTA was approved in principle by Nancy Pelosi. The vote on that deal is set to take place next week. Pelosi actually took some heat for handing Trump a win in the same week he is being impeached. But more important than the partisan win is the possible end to at least a portion of the trade war with China. That should result in some price relief on consumer goods and even stronger economic growth in the near term. All of that is bound to help the stock market and public perception of the strength of the economy.”
John Sexton, Hot Air

“The U.S. has a far more adaptive and diverse economy than China. China’s economy is inefficient, bloated, dysfunctional—plagued by institutions and policies that are not fit for their purposes. If the tariff war resumes, it will continue to prove much more disruptive to China than to the U.S… Mr. Xi’s purging of more than 1.5 million officials, including top generals and party members, will come back to bite him. In addition to holding a weaker economic hand, Mr. Xi is far more vulnerable to internal rebellion, and therefore more desperate for economic pain relief, than the American president… In every negotiation, pressure is relative, and the U.S. has more political and economic leverage than China

“Mr. Trump is properly recasting China as the main threat to a fair and sustainable global economic system. Multinational companies are gradually assessing the commercial risk that sovereign risk poses to them—the possibility that China will arbitrarily alter laws or regulations or fail to honor government bonds when they mature.”
John Lee, Wall Street Journal

“While Chinese concessions will almost surely fall short, the US didn’t give up leverage (as some wanted) and can respond either to meaningful progress by China or the lack…

“The US should use [the deal] to test Beijing’s intentions. Will American exports soar $200 billion and coercive technology practice halt – no. But clear progress on both fronts would be an excellent outcome. In this light, complaints the deal doesn’t go far enough smack of preferring American capitulation. Sizable tariffs were applied barely six months ago; the PRC won’t undertake major change at the convenience of an increasingly shrill American investor class. The US can now wait to see how China’s deeds fit its words — a good position in an election year.”
Derek Scissors, American Enterprise Institute

It’s worth noting that “conservative ideas were much more popular when not associated with the Republican party. In Washington State, voters narrowly rejected bringing affirmative action back to state contracting and university admissions…

“In Seattle, the self-proclaimed socialist city-council member appears to have lost her seat to a pro-business challenger. In Colorado, voters gave fiscal conservatives a big win by rejecting letting the state keep any tax revenues above the state spending cap, money that the state Taxpayer’s Bill of Rights currently guarantees as refunds to taxpayers. In Sussex County, N.J., voters approved, by a 2-to-1 margin, a referendum directing the local freeholder board to cooperate with U.S. Immigration and Customs Enforcement. (Washington, Colorado, New Jersey — notice these are places where Republican candidates have had no luck lately.)”
Jim Geraghty, National Review

“If a dozen drones or missiles can do the kind of damage to the world economy as did those fired on Saturday—shutting down about 6 percent of world oil production—imagine what a U.S.-Iran-Saudi war would do to the world economy. In recent decades, the U.S. has sold the Saudis hundreds of billions of dollars of military equipment. Did our weapons sales carry a guarantee that we will also come and fight alongside the kingdom if it gets into a war with its neighbors?… the nation does not want another war. How we avoid it, however, is becoming difficult to see. John Bolton may be gone from the West Wing, but his soul is marching on.”
Patrick Buchanan, The American Conservative

Others note, “I’d hate to be a Democratic member of Congress trying to convince Joe Sixpack that this is a whole new ballgame. The transcript shows Trump being Trump and Ukrainian president Volodymyr Zelensky trying to ingratiate himself with the big dog by, for instance, mentioning that he stays at Trump hotels. Trump’s conversation is typically scattershot, wandering all over the field, leaving a reasonable listener puzzled about what the takeaways are supposed to be…

“I think Joe Sixpack’s response is going to be a hearty shrug. After all that has emerged about Trump so far, his approval rating is closely tracking Obama’s approval at the same point in his presidency. To get Mr. Sixpack’s attention you are going to have to do better than this.”
Kyle Smith, National Review

President Trump should be happy. As much as Warren is articulate, obviously intelligent, and energetically supported by Democrats, she would also be far easier to defeat than Joe Biden… Considering Trump's economy, the president is well placed to defeat Warren.”
Tom Rogan, Washington Examiner

A libertarian's take

The deal is pretty good because it reduces business uncertainty, confirms that the administration realizes its approach was unsustainable, and—by formalizing terms to resolve the variety of issues that, frankly, distract attention from the most difficult problems in the relationship—creates needed space to shift focus to the genuinely challenging matters…

“Relative to what was looming (higher tariffs on all imports from China), these terms should be welcome news to most consumers, workers, businesses, and investors in the United States and China, and throughout the world.”
Daniel J. Ikenson, Cato Institute

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