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It’s Time to Make a Trade Deal With China

Posted on Friday, February 1, 2019
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by Outside Contributor
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strategy china usa pay theft intellectual property china trade dealAs American and Chinese delegations wrap up trade talks Thursday in Washington, the official word is that U.S. negotiators have articulated where they want China to make reforms. Unofficially, though, questions remain over how the White House perceives the future of U.S.-China economic relations, and how this might upset trade negotiations.

So where are the U.S. and China in this trade dispute, as the teams led by U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He conclude their talks?

Despite almost 18 months of efforts, the White House has yet to bring fundamental change to China’s trade practices.

This should come as no surprise given the scale of the issues involved, including subsidies, treatment of state-owned enterprises, coerced technology transfer, and intellectual property rights.

Lighthizer simply can’t deliver a comprehensive deal that resolves all these issues before March 2, when the additional tariffs on $200 billion worth of goods Americans buy from China increases from 10 to 25 percent.

In fact, some doubt whether the U.S. trade representative can deliver a comprehensive and sustainable deal before 2020. China is limited in what it can give the U.S.—constrained by both domestic and international obligations.

It’s worth repeating, however, that a trade war with China isn’t sustainable over the long run, either. Now is the time to make a deal with China, even if it’s limited for the time being.

American exporters may never fully regain market share in China. But American manufacturers would at least see less uncertainty and boost investment in China and at home. American importers would get to stop paying billions in taxes to the Treasury Department.

If over the next 30 days, Lighthizer can achieve a light trade deal with China, the real winners will be those Americans who are still being hurt by the trade war. Meanwhile, he can get a down payment on some policy changes and put in place mechanisms for monitoring and enforcing future commitments.

Nothing will establish trust and enable future progress like verified implementation of policy changes.

A Possible Deal Within 30 Days

There’s no certainty that Washington and Beijing will come to an agreement by the end of February. But given the slowing Chinese economy and soon-to-slow U.S. economy, there’s more pressure now to make a deal.

Here’s what that could look like:

Washington and Beijing agree to remove tariffs. It’s questionable whether all the tariffs would be removed immediately. A truce on imposing more tariffs would be good. The U.S. has tariffs on over $250 billion worth of Chinese goods. China has tariffs on over $110 billion worth of American goods.

Beijing offers again to purchase more American energy, agricultural, and industrial goods. Already, soybean sales to China have resumed since a December meeting between U.S. President Donald Trump and Chinese President Xi Jinping.

Beijing removes some joint venture requirements.There is increasing talk about removing venture requirements in China for U.S. financial, insurance, and automotive investments.

Beijing commits to greater protection of American intellectual property from theft and illegal transfer.There is uncertainty over how both the U.S. and China could police and enforce these efforts, especially when it comes to cyber-enabled theft. This will need to be worked out. Beijing already is taking steps to reform its tech transfer laws.

Beijing agrees to fair disciplines on subsidies to its state-owned enterprises. Nearly 40 million people are employed by state-owned enterprises in China, known as SOEs, which are roughly valued at $27 trillion. The Chinese Communist Party won’t tinker with them without a fight—however good it may be for China’s economy.

Both sides commit to frequent and regular dialogues. A deal by March doesn’t mean that’s the end of U.S.-China trade negotiations. Continued meetings will be important to make sure previous agreements are implemented and new reforms are forthcoming.

These are just a few options that might fulfill the list of 142 demands the U.S. side has for Beijing.

What’s missing from the list is a reduction in China’s nonretaliatory tariffs. Despite the meetings being called trade talks, this isn’t your typical trade deal.

China’s international trade agreements prohibit it from giving U.S. exports preferential treatment. China can lower tariffs to the rates committed to in the World Trade Organization, as it did earlier last year on auto imports. But besides this, American exporters shouldn’t expect to gain an edge against their European, Latin American, and Asian competition in China.

Going forward, the sticking points will remain intellectual property theft, what sort of enforcement mechanism both sides can agree upon, and how to make sure China is compliant.

The White House has shown it is willing to go to bat over this type of unlawful activity in China. However, it’s unrealistic to expect the intellectual property issue to be solved anytime soon.

Those who understand this yet support continued tariffs don’t understand that revenge against intellectual property theft is neither an appropriate nor effective U.S. policy.

The Justice Department’s efforts to indict Chinese companies charged with corporate espionage is one good effort. But the U.S. could be doing more to sanction those companies and individuals found guilty of intellectual property theft.

There’s little reason American businesses and consumers should continue to bear the cost of the trade war when there are other, more effective policies out there. Reaching a limited deal with China before March 2 would be a good start.

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PaulE
PaulE
5 years ago

Ever since Bill Clinton supported China becoming a member in the WTO, they have been stealing, in one form or another, every piece of intellectual property of value from us and the other major industrial nations around the world, that they could get their hands on. They have also been intentionally pricing American goods out of the Chinese market via import tariffs that run anywhere from double to as much as 20 times what we charge them for comparable goods from China here in the U.S.. For decades, Presidents and administrations of both parties have looked the other way, while the situation worsened and our technological lead and balance of trade suffered. Now that we have a President that both understands that this pattern of Chinese behavior is neither in the best interests of our country from either a security, economic nor long-term standard of living perspective, he is trying to correct a situation that past U.S. Presidents simply decided to ignore at the expense of the average American citizen and our country’s future.

The President’s policies so far have been devastating to the Chinese economy, which was the intent to finally bring the Chinese to the negotiating table in a serious fashion. The other policies that the author speaks of, which are strictly small tweaks to existing practices, only benefit those that want the status quo to remain our policy. They do NOTHING to solve the bigger issues we face and that will ultimately lead to us being a second rate power behind China in under a decade. Now is NOT the time for us to throw in the towel and accept a few scraps that the Chinese may offer to placate us and then allow them to continue their business as usual practices until they finally do meet every one of their China 2025 objectives. That may be beneficial to the establishment, that supported Bill Clinton’s efforts to get China most favored nation status and subsequent administrations to look the other way as China abused the international system left and right, but it is NOT good for America.

Sorry if doing what is right and expecting that China be held to the same rules of law that define the WTO and our own American justice system is considered offensive to some in the establishment, but some of us care more about the long-term future of this country than the folks like the Chamber of Commerce and the Business Roundtable that prefer the existing status quo. No one in the establishment thought the President would have gotten as far as he already has with the Chinese. Yet he has been incredibly successful by simply acting the same way any successful business man would act, if faced against a business opponent used to dealing in illegal and unethical means as their standard business means. Hit them where it hurts in the wallet, by cutting off their means of generate more money, and you can indeed bring them to the table to negotiate.

Will the President get everything he wants by the March deadline? Likely no, but no one on our side expected we would be able to undo 30 years of bad policy in a few months. However, we will certainly get a far better initial deal by March, than we would we get by following the author’s suggestion and throwing in the towel at the 11th hour. I expected from the beginning that it will realistically take years to completely undo the damage that past U.S. Presidents. of both parties, agreed to accept. That doesn’t mean we can’t come to a series of deals along the way that can benefit but us and the Chinese as we work towards cleaning up this mess.

I understand that the establishment is hoping the President will fail or throw in the towel, so they can run one of their preferred establishment RINO’s in 2020. I can already give you a list of some of the potential folks on the Republican side, based on how they are already positioning themselves. Someone who will pitch him or her self as a more reasonable or compassionate conservative, but actually be another rubber stamp for the status quo. Well I think most people on our side are hopefully fed up with that brand of Republican and wouldn’t want to go back to “losing with dignity”.

Have a great weekend and keep warm.

josh
josh
5 years ago

Ridiculous. We need to take our time and get the right deal. China has for too long had an unfair advantage. China has been stealing our intellectual properties, stealing our secrets and technology. I would prefer to see our manufacturing to come back to America. China is a communist, atheist country. China has a bad record oppressing and murdering it’s people and the people of Tibet. We do not want to continue to build China up. China has already built it’s military up to the point where it threatens America. A powerful China will bring tyranny into the world.

Rick Jordan
Rick Jordan
5 years ago

China will stall and procrastinate, due to their belief that President Trump will begone in two years. After Trump is
gone they assume that a Globalist Democrat will replace him, and then give the store away!!!

Martin
Martin
5 years ago

I don’t understand why we don’t establish factories in Mexico and produce the items we purchase from China there. This would help reduce the immigration problems by creating jobs in Mexico and maybe expanding to Central America . Reducing the trade we do with China would help reduce the money they have to go towards the weaponry they are producing. Trade with our neighbors would better our situation and put more of a strain on China.

Chris
Chris
5 years ago

I remember the thinking back then when China was first starting to rise. It was kind of along the lines, “Yeah, they cheat but that’s the communists, once the people get a taste of the better life that a freer economy and world trade brings they’ll change the system from inside. Their cheating is a price we should pay to help China change [for a while]”. *NO ONE* expected the communist party to remain in power, but they managed to walk the tight rope both enabling freer commerce and maintaining political control.

As the old arguments/approaches failed to bring about the expected changes in China I don’t see why we’d stick with them as this author seems to suggest. its time for a new approach. Outline what such an approach would look like and how we get there — only then should we consider a “light” deal if it is *part* of that path. The author is expecting us to accept on faith that we’ll eventually get somewhere we like, “just because”, I don’t see that. If you don’t know where you’re going, you won’t get there. As yet, i don’t see that we know where we’re going, just fumbling around in the dark hoping to get lucky.

Bob
Bob
5 years ago

This article is insulting and only serves to bolster the notion that current Chinese policies are tenable for US economic health.
I support our president and am confident that he will do what is right for our country.
I am very surprised to see this piece flying under the AMAC banner.

TomB
TomB
5 years ago

After decades of our Presidents “rolling over” to China’s demands, why should they make a deal with the U.S. now? We’re divided politically, they know it, and will take advantage of that division. They may agree to small changes, then play a waiting game to see how President Trump looks in the 2020 election before agreeing to any big deal. China has had it too good for too long and they’ve become used to our capitulation, now the “sheriff” isn’t so easy to bluff and want’s something done about trade fairness and especially the theft of our Intellectual Property. P.S. – Ever notice how Chinese planes and ships look just like our own?

Wingleader
Wingleader
5 years ago

China and Russia are conspiring to attack America. Russia has announced new missiles that cannot be stopped once launched. They have rebuilt their airforce and modernized all weapons to state of the art, including cyber warfare. China is building naval ships at an astounding rate and their Navy is now much larger than ours. China and Russia both have more nuclear weapons than we do and they are more advanced than ours. Additionally, they have weaponized all fishing boats. With a population of 1.7 BILLION they would no problem fielding an army of 200 million! Bottom Line; America cannot win a war against China/Russia and their plans to attack us are now in place. Do we really want to give them more money to continue the military build up?

Bob L.
Bob L.
5 years ago

I wouldn’t trade with Red China at all. I view such trade as the same as selling scrap metal to pre-WW II Japan. Red China has and continues to send us intentionally contaminated, poor quality, and even dangerous goods.
I would make some great trade arrangements with The Republic of China (Taiwan) though.

Press ONE for English
Press ONE for English
5 years ago

Shame on AMAC for printing such twaddle. Sad reality, at some point we may end up having to do some of the things outlined in the article, as a matter of short term expediency. But let’s not rush blindly into a massive giveaway just as out sanctions etc are starting to show results. The writer expended bushels of vowels on these give-ins but absolutely none on a LONG RANGE VISION. What is the desired outcome here? Where do we want to be in 20 years? Still fighting these same stupid battles as China continues to run roughshod over us and our businesses, becoming ever more wealthy,. powerful and dangerous in the process?

I say our vision should be to disentangle ourselves from China as much as possible. Bring business back to the US and quit dealing with China, except in situations that benefit US. No one is talking about the clear takeaway lesson these trade gyrations have shown us so plainly, that is, we are WAY too dependent on China for our own good and security. We need two way caps on China trade. One, trade with China in any one industry or business activity should be strictly limited to (TBD) percent. And two, ALL trade with China combined (import and export) should never exceed (TBD) percent of GDP. These constraints should be inflexible and should be reduced slowly and steadily over time, to give businesses time to modify their policies. This is not a comprehensive plan but a good foundation to build on and a clearly stated goal to work toward.

I think continuing the tariffs is a good idea even though it places hardships on certain industries. The money generated by the tariffs should be used to help those businesses change their focus to a US-centric one, moving production here, finding new markets for the commodities that would otherwise be sold in China. Also sale or transfer of any and all technology and products that could even remotely be construed as having military potential MUST be outlawed.

Following this strategy, and implementing these goals may cause some short term pain early on but will yield big benefits in the future, making us a more secure and prosperous nation. These are outcomes only a progressive could hate.

Marc Ziegler
Marc Ziegler
5 years ago

NO, NO, NO, this is what has gone on for 30 years, no agreement to change trade practices, with good enforcement, then NO deal. How long does the US have to be ripped off, $500 Million/Year by China, before we get treated right. Trump has finally brought us to the point of making a decision, do we want fair and free trade or don’t we???? A trade war may result in some short term hardship, but to get China’s communist regime to capitulate, we need to take a tough stand. We are all fooling ourselves if we think China will change their ways voluntarily, if we don’t make them change by economic force, we will all pay a higher price later.

Pinokeeo
Pinokeeo
5 years ago

What is our debt to China?There is no trade balance here in the USA.Wake up people or loose it all in the near future.

Dean Eickman
Dean Eickman
5 years ago

It may be time to make a deal,but do we really trust china to be honest,i think not.

Judy
Judy
5 years ago

Has China made any motions toward negotiating a new trade deal, or are they sitting there saying “That won’t work.” It takes two to make a trade deal. The USA cannot get a deal if we are the only ones talking.

Joe McHugh
Joe McHugh
5 years ago

Here’s a suggestion. Make all American tariffs on Chinese products equal to all Chinese tariffs on American goods exported to China.

Add to that, securing the American technology that the Chinese steal to become competitive with America. If the Chinese insist that such technology be provided or they will further restrict access to the Chinese market, cut a proportionate amount of Chinese exports to America, using the club of knee buckling tariffs on Chinese products.

This is the thing, America can, once again, make everything that we now import from China. If that increases prices in the United States, that is the cost that we will have to bear. There is no easy answer to the Chinese problem.

Perhaps the real answer is to begin to ween ourselves off of cheap Chinese imports and start becoming more self sufficient again.

Thomas F Wuthrich
Thomas F Wuthrich
5 years ago

Something to keep in mind when we shop on Amazon: A percentage of what we pay whenever we buy a product made in China will go to build up the Chinese military and/or enhance their ability to surveil and control their population.

joan
joan
5 years ago

Why bother w/trade w/China. Most of their stuff is just cheap junk, in my humble opinion. I don’t trust them either since the manufacturer’s are ruled by the communist government. Some meds made there are not pure, the children’s jewelry was made w/lead in it at one time. So what else are they being forced to do that hurt American citizens?

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