The new understanding between China and the US on trade is very welcomed. Even though it is very minor and a seeming betrayal of Trump’s campaign promises to the white working class. Here are a few thoughts:
- The linkage between security and trade is important. As long as this provides for growing trade ties and better political relations between the U.S. and China.
- The actual provisions of this new understanding, dealing with US beef imports to China, electronic payment systems in China, and LNG exports to China, have been in the works before the Trump administration. For example, the WTO already ruled on EPS. China had previously committed to implement that decision. And these matters in general have only been minor annoyances or friction in US-China trade.
- China has no obligation to purchase LNG. The lifting of restrictions on US beef imports relate to a very outdated response to health issues of US cattle last decade.
- The provision allowing for cooked-chicken into the US from China is very problematical. Food safety and security in China is widely considered by the Chinese themselves as very poor throughout China. That’s why Chinese agricultural firms have been buying and investing in US agricultural and food companies, for among other reasons, to secure better technology.
- The Trump administration’s threat to the WTO, by reliance of Section 232 ‘National Security Provision’ to impose additional tariffs on imported steel, can explode in the faces of the U.S., the WTO and the global trading system. There has never been a WTO decision on Article XXI of the GATT that governs the security exception.
My conclusion — This understanding, not binding legal obligations, is not unexpected. They do not address the main issues. May just be window dressing. Hope not. We’ll see. Probably pretty shortly.
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