- By Jessica HolzerJessica Holzer is an editor at Foreign Policy. She previously covered financial regulation for The Wall Street Journal.
The Trump administration parked its get-tough rhetoric on trade with China to trumpet an agreement on beef and energy exports with Beijing, even as the White House continues to rail against supposed abuses by friendly countries like Mexico and Canada.
Commerce Secretary Wilbur Ross touted the deal, which would open China’s market to U.S. beef exports after years of restrictions as a “herculean accomplishment.”
President Donald Trump tweeted the virtues of the deal, calling it “real news!” And White House Press Secretary Sean Spicer started a contentious news briefing Friday by touting the merits of what he called the president’s fight for American jobs.
In truth, the trade wins build on market openings already under way. Last fall, the Obama administration secured preliminary access to the Chinese market for U.S. beef exports, which had been disrupted for more than a decade because of the “mad cow” scare, but hadn’t finished the technical trade talks. And the new agreements also formalize the ability of China to import natural gas from the United States; China already imports significant volumes of U.S. liquefied natural gas.
What’s more, the new agreements depend on highly undependable Chinese cooperation, one reason similar accords have been struck in vain in the past. However, the quick progress signals a more pragmatic approach by the administration to dealing with trade tensions between the two countries, after months of saber-rattling and talk of a trade war.
The administration said the agreements were the fruit of a review carried out as a result of the meeting between Presidents Trump and Xi Jinping. The speedy conclusion heralds a welcome shift from the obsession with trade deficits that has defined the administration’s trade policy so far, said Derek Scissors, an expert on China’s economy at the American Enterprise Institute
The problem is, the administration isn’t applying this approach across the board: It’s still haranguing key U.S. allies over negative trade balances. On May 4, Commerce Secretary Wilbur Ross called out Mexico and Japan for their trade surpluses with the United States, which he said were growing at “an alarming rate.” (Mexico’s trade surplus with the United States has widened in part because Trump’s Mexico-bashing rhetoric has lowered the value of the peso, which in turns boosts its exports and squeezes its imports.)
“The United States can no longer sustain this inflated trade deficit with our closest trading partners,” Ross said in a press release.
But Scissors said that hammering friends and neighbors over trade balances while glossing over it with rivals could be counterproductive.
“If you think the problem is the trade deficit, you cannot chicken out on China and go after the small countries,” he said. “That is terrible policy – both in terms of trade and in terms of our diplomatic policy.”
Last month, Trump vowed to terminate or renegotiate the South Korea free trade deal, which took effect just five years ago, calling it a “horrible” deal for the United States. And he came close to pulling the United States out of the North American Free Trade Agreement with Mexico and Canada, before backing down after calls from Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau.
“The administration doesn’t seem to understand the context of the relationships,” Scissors argued. “Canada and Mexico are friends of the United States, and their trade practices are better than China’s.”
Aside from easing restrictions on American beef and liquefied natural gas, Thursday’s agreement would lift restrictions to allow U.S. electronic payment processors to operate in China. Beijing would also grant licenses to two U.S. banks seeking to underwrite stock or bond offerings in China.
On the Chinese side, the deal would open the U.S. market to cooked poultry imports from China and give Chinese banks operating in the U.S. the same regulatory and supervisory treatment as other banks. The agreement also says the United States “welcomes” investment from Chinese entrepreneurs – language important to Beijing amid rising concern in America that such investments could pose a national security threat.
The issue now will be follow-through. China has a long history of formally granting market access but then effectively blocking it by controlling how Chinese firms conduct business, or by other informal restrictions on how foreign companies can operate.
A case in point: Telecom ventures. In the negotiations leading to China’s accession to the World Trade Organization more than a decade ago, the United States fought for access to China’s telecom industry. To date, there have been no joint ventures of any significance between Chinese and American firms, according to Scissors.
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