Expect A Deal With China, Just Don't Expect Much From It

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Posted: Jan 09, 2019 9:18 AM
Expect A Deal With China, Just Don't Expect Much From It

Trump says the trade talks with China are going well. And China will purchase soybeans again. Don't expect much more.

Talks Going Well

The New York Times reports China Offers Trump a Trade Peace Deal. It May Not Be Enough.

Beijing’s effort so far adds up “to a modest adjustment of Chinese foreign economic policy,” said Scott Kennedy, a scholar at the Center for Strategic and International Studies in Washington, “but nowhere close to the great leap in liberalization that the U.S. and others are seeking.”

Still, China has begun to budge. Last month, it dropped retaliatory measures on American-made cars and resumed purchases of American soybeans. It has also reduced tariffs on more than 700 categories of goods from around the world.

On cars and soybeans, American negotiators can claim some measure of victory. Soybean purchases have yet to reach earlier volumes, however, while Chinese imports of American-made cars are quite small since many are already made in China.

Chinese lawmakers last month released a draft of a proposed law that would stop local officials from forcing foreign companies to transfer their technology as a cost of doing business. The Trump Administration says that Chinese industries like cars and aviation have benefited from American technology.

The law may not change things meaningfully, said Donald Clarke, a specialist in Chinese law at George Washington University. The draft is vaguely worded, he said, and doesn’t acknowledge that the pressure American companies face to share their know-how often comes from behind-the-scenes maneuvering rather than strict government requirements.

The biggest sticking point in China’s package of concessions to the White House may be Made in China 2025, a government plan for developing high-tech industries. The Trump administration has repeatedly criticized the plan, saying that it is evidence that China unfairly supports its own companies over foreign competitors in the Chinese market.

Expect a "Great Announcement"

Both Trump and China need a deal. If there isn't a deal, China will again stop buying US agricultural products.

And Japan will be buying less US agricultural products thanks to a new Pacific trade agreement that Trump backed away from. See Remaking the TPP Without the US: US Ag Exports to Japan Will Plunge.

The tariff wars hurt both the US and China. Both nations want to save face.

Recall that Trump replaced NAFTA with great fanfare. The new agreement, USMCA, was nearly identical to the old agreement, but worse in one key aspect: legal protection of US companies against corrupt Mexican courts.

So expect another "great announcement" with minor tinkering around the edges.

Made in America

I have a basic question. If Trump can set a goal of made in America, and the French made in France, why can't China have a goal of made in China?