Trump dials down his beef with China
Little has changed in trade relations except the tone of the president, argues Tim Wallace
What is Trump’s new trade deal with China?
Donald Trump talked tough on trade with China before his election.
He blamed the world’s secondlargest economy for taking manufacturing jobs away from the US, unfairly depressing its currency to gain a competitive advantage over his country and dumping artificially cheap materials such as steel on to the world markets.
But now the US and China have agreed a 100-day action plan as part of their “comprehensive economic dialogue” in an apparent change of tone from the president.
What have the US and China agreed to?
The two countries have published a 10-point action plan on topics ranging from meat imports and exports to financial services to biotechnology.
China will allow American beef into the country while the US says it will take steps towards allowing “Chinaorigin cooked poultry” imports.
China has agreed to evaluate eight US biotechnology product applications, and the US is encouraging the country to buy its liquified natural gas (LNG), too.
US officials have agreed to extend a ruling which does not punish the Shanghai Clearing House for regulatory failings, and promised to treat Chinese finance firms in the same way as they treat any other foreign businesses in the US.
On China’s part, the authorities have decided to allow foreign-owned credit ratings agencies to examine the quality of borrowers in the country.
This is by no means a free trade deal, nor even a step towards any sort of comprehensive agreement, however.
When does it come in to force?
Some of it is already in force – the US has already decided not to punish the clearing house, for example, so this agreement is an extension of an existing policy rather than a new idea.
Others are harmless commitments which have little actual effect – the 10th point on the list, for example, explains that “the US recognises the importance of China’s One Belt and One Road initiative and is to send delegates to attend the Belt and Road Forum in Beijing May 14-15”.
That is supportive of China’s efforts to increase its trade across Asia and into Europe, but requires little effort on the US’S part.
Many of the pledges are agreements to try to strike an agreement in future, covering very limited topics.
The beef and chicken agreements fall into this category, as both sides have agreed to try to resolve the current situation, pledging to begin work on that by July 16, with no set deadline for any actual final decision.
Other points apply to more countries than the US – the promise that China will allow foreign-owned credit ratings agencies to operate in the country, for example – and so are hardly specific to this action plan.
On top of that, this element of the deal is not even new. China’s government proposed it in December 2016 in the hope that allowing in foreign assessors would give its indebted companies and state agencies more credibility with investors.
The pledge to treat Chinese finance firms in the same way as any other non-us businesses is also a continuation of the official status quo.
The newer element – that the People’s Bank of China and the US’S Commodity Futures Trading Commission will work towards a memorandum of understanding regarding exchanging information needed to oversee cross-border clearing – is another example of an agreement to work towards an agreement, rather than a solid deal. In a sense those elements can be seen as part of China’s broader move to open up to the world, rather than to the US.
Is this a U-turn from The Donald?
While it does not actually change a great deal in terms of the letter of the law or the conditions under which each country trades, this is a sign that relations between Washington and Beijing have improved substantially.
Before his election, Mr Trump said: “On the first day of my term of office, my administration will immediately… direct the secretary of the Treasury to label China a currency manipulator.” He also campaigned on a promise to whack substantial tariffs on Chinese imports – policies which it was feared could lead to a full-blown trade war with retaliatory taxes and restrictions hitting back at US exports.
But China has not been labelled a currency manipulator and this document certainly makes no mention of border tariffs – those parts of the president’s rhetoric have been dialled down significantly.
However, Mr Trump had also taken issue with the persistent trade deficit which the US runs with China, arguing that the US gets a bad deal because it imports more goods from China than China buys from the States.
In a small step to tweak the balance, the deal does open the way for more beef exports to China as well as seeking to encourage LNG sales.
It also looks to increase Chinese chicken sales into the US – but as part of a give-and-take agreement, this may pass the president’s “fair-trade” test.
‘China has not been labelled a currency manipulator and this document makes no mention of border tariffs’