Status Quo Ante Bellum

7 November 2019


Cogito Ergo Non Serviam

US, China Agree to Tariff Cuts


The US and China seem to have realized that the tit-for-tat tariffs they have levied on one another have hurt both for no real gain anywhere else. The two sides will reduce tariffs in preparation for the undefined, detail-free phase one part of their trade agreement. The Chinese have said their objective is to remove all tariffs recently imposed as soon as possible. The Americans will probably agree to that as it is easily achievable compared to the other things the administration wants from China. The goal is to return to the status quo ante bellum. That suggests the whole conflict was ridiculous in the first place.

Spokesman for the Chinese Gao Feng told Reuters, "In the past two weeks, the lead negotiators from both sides have had serious and constructive discussions on resolving various core concerns appropriately. Both sides have agreed to cancel additional tariffs in different phases, as both sides make progress in their negotiations."

The Chinese are going a bit farther by offering to end its ban on poultry imports from the US. These were levied after an outbreak of avian flu back in 2015. If that were to happen, it would be a bonus for the US, but it would hardly justify the hardships imposed on both US exporters and Chinese consumers with these tariffs. Moreover, the poultry ban was about protecting health and food supplies not about terms of trade; in other words, it's a legitimate ban that has run its course.

The damage done is significant. The New York Times reported, "Since the start of the trade war, the United States has imposed tariffs on more than $360 billion a year worth of Chinese products, while China has placed tariffs on roughly $100 billion of American goods. Tariffs now cover about two-thirds of the trade in goods in each direction."

The two presidents will meet somewhere in the coming weeks. The original plan was to sign the phase one deal in Chile during the APEC summit, but the civil unrest there led to the cancelation of the meeting. In any event, it is still unclear just what the phase one deal is.

America has wanted the Chinese to cease the theft of intellectual property, end its systematic subsidies to industry and halt the ownership rules that prevent foreign companies from holding a majority stake in its own Chinese subsidiaries. China has made plain that it will do nothing of the sort.

The South China Morning Post stated that "Phase two of the negotiations would address more of the so-called structural issues, such as China's state subsidies for its industries and other issues related to technology transfer that are not resolved in the first round of talks."

It is clear, therefore, how this will play out. The tariffs will be reduced to original levels, the largely meaningless phase one deal will be signed, and phase two negotiations will drag on until President Trump returns to private life, whether he is re-elected or not. Mr. Trump will again claim that he has had a great triumph when all he has done is reduce the harm done by a problem he himself caused.

The structural problems with China adversely affect the Chinese economy, and the Chinese leadership understands this. By the same token, they are unwilling to make the short-term sacrifices and political concessions needed to realize the long-term gains of a more open economy. The US can and should assist this transition quietly and patiently. Mr. Trump is neither quiet nor patient. His tariffs have achieved nothing, and the last three years have been a waste in developing the US-China relationship.

© 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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