It\u2019s worth repeating that a trade war with China isn\u2019t sustainable over the long run.<\/b>
\nAs 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\u2018s 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\u2019t 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. \u2013 constrained by both domestic and international
obligations.
It\u2019s worth repeating, however, that a trade war with China
isn\u2019t sustainable over the long run, either. Now is the time to make a deal
with China, even if it\u2019s 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\u2019s 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\u2019s more pressure now to make a deal.
Here\u2019s what that could look like:
Washington and Beijing agree to remove tariffs. It\u2019s 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 Presidents Trump and Xi.
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\u2019t tinker with them without a fight \u2013 however good it may be for China\u2019s economy.
Both sides commit to frequent and regular dialogues. A deal by March doesn\u2019t mean that\u2019s 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\u2019s missing from the list is a reduction in China\u2019s nonretaliatory
tariffs. Despite the meetings being called trade talks, this isn\u2019t your typical
trade deal.
China\u2019s 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 they did earlier last
year on auto
imports. But besides this,
American exporters shouldn\u2019t 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\u2019s unrealistic to expect the intellectual
property issue to be solved anytime soon.
Those who understand this yet support continued tariffs
don\u2019t understand that revenge against intellectual property theft is neither an
appropriate nor effective U. S. policy.
The Justice Department\u2019s 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\u2019s 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.<\/p>\n