Cogito Ergo Non Serviam
Phase One China Trade Deal is Just Puffery
Donald Trump has got himself in hot water with the Chinese who buy products from farmers and manufacturers who backed the president in 2016. As a result, the farmers and manufacturers are in an economic slump thanks to the president's trade war with the People's Republic of China. In an attempt to shore up his crumbling support, he has announced the successful completion of "phase one" of a trade deal. Mr. Trump said, "We've come to a deal pretty much, subject to getting it written." The president, who claims to have been a successful real estate magnate, should know that nothing is agreed until everything is agreed. And since the two sides have yet to agree on the language of the alleged deal, there is no deal. The president's announcement is puffery, and that is shining a generous light on it.
The most tangible facet of the phase one agreement (the term used broadly and with some irony) is America's delay of tariffs that were to go into effect next week. The US was going to raise the rate on $250 billion of Chinese goods to 30% from 25%. That isn't happening now. The threat to impose further tariffs on December 15 remains.
The next significant fact, as explained by Bloomberg, is that "China would scale its purchases of U.S. farm goods over two years to an annual total of $40 billion to $50 billion. Trump encouraged U.S. farmers to buy more land and Deere & Co. tractors in response." Now that sounds good, but China bought close to $30 billion a couple of years ago, and it dropped off from there. Currently, thanks to the trade war, China looks like it will be buying just $8 billion this year. Scaling back up is going to be a problem, and China is not really concerned about hitting that target. If things get back to the status quo ante, it would be a fortunate turn for the Americans. In other words, back to zero would be just fine. Achieving nothing would be an improvement.
However, this phase one agreement has achieved less than nothing. The biggest problems in the US-China trading relationship from the American perspective are the forced transefers of technology and the outright theft of intellectual property. The phase one deal, if it exists, will lower the pressure on China, and that will make China less likely to compromise in these key areas.
Derek Scissors, a trade expert at the American Enterprise Institute who has advised the Trump administration, told the Wall Street Journal, "If this turns out to be all there is, we could have achieved these results a year ago or more."
This is typical Trumpism. First, one creates a problem where the was no problem before, or one exacerbates a problem that already exists. Second, one fumes and vents publicly. Third, one realizes the other side is not moving. Fourth, one announces a "solution" whether one exists or not. The idea is not to solve problems but rather to control the news cycle. For a president facing impeachment over abuse of power and violation of the emoluments clause, declaring a breakthrough in America's trade war with China comes right out of the playbook of the 45th president.
Phase one of the China trade deal is the diplomatic version of vaporware in the technology field. One can't actually buy it because it exists only on the drawing board, if there.
© Copyright 2019 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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