Wednesday, January 15, 2020

The US-China Nothing Burger Trade Deal

There has been much hype about the signing of Phase One (and probably only) US-China trade deal.  However based on a front page story in today's Washington Post, there is not much there.  The US did not raise tariffs as planned, but tariff still remain on two thirds of the sectors that had them, although some were halved.  But numerous US sectors see no change at all and are now viewing the  situation as not likely to improve, with them suffering losses of business likely to return.  Among those are chemicals, apparel retailers, and auto parts. In these and other sectors there is not much reduction of uncertainty regarding US-China trade, so not likely much increase in investment.

The main items in it besides no worsening of tariffs, China has made promises not to pressure US firms to turn over technology and also to increase imports from the US by $200 billion over the next two years, especially in energy and agriculture. So maybe US soybean farmers will no longer need the bailouts of billions of $ Trump has been providing to them.  However, such promises have been made in the past.

As it is, I am watching commentators on Bloomberg, and about the most any of them are willing to say is that this "puts a floor" on the "deterioration" of US-China trade relations.  That is far from some dramatic breakthrough, and most of the tariffs put on as part of the US-China trade war remain in place.

Barkley Rosser

28 comments:

Anonymous said...

What would you have sought in the way of a trade agreement with China? What would be your complaint about the nature of our trade relations with China? Why is trade with China different than trade with say India or Brazil or South Africa, or is China just more productive?

Anonymous said...

Another question that seems important; how was China able to successfully fend off the tariffs and technology bans that the United States used in 2019?

Anonymous said...

Supposing I understand the actual purchasing agreement, the agreement is based on "market conditions" so that while there will be a significant increase in purchases of American goods the increase will not be beyond what is healthy for the Chinese economy. This strikes me as fair.

rosserjb@jmu.edu said...

Hmmm, several questions here, Anonymous.

As it is, upfront, I think this whole trade war has been largely a farce, and as I noted, this agreement does not amount to much. Furthermore, to say something I did not be clear about, where we are now is worse than where we were (as Americans, aside from some special interest groups) than before this.

Does this mean that China has been squeaky clean on all this? No. But this agreement does not deal with PRC's more egregious behaviors, in my view. Those would be excessive subsidies to export firms and at least some of the intellectual property violations, blatant copying and so on. None of this was dealt with, the second of these hard to deal with anyway, and the former being viewed by the Chinese as systemic. Of the items in the deal, I am only mildly in favor of the tech transfer stuff. The rest is mostly a joke, and will not be fulfilled by the Chinese anyway.

I shall simply further note here now that to the extent there needed to be an effort to get the PRC to change its behavior, which I think there has been some case for (if not what many think it is), the way to do that was to have an international coalition approach China together. To do this Trump should have stayed in the TPP, which would have had 11 other nations in the Asia-Pacific region supporting it. Also, h should not have gone after the Europeans ans some other allies with trade and other disputes.

If Trump had approached China with both the TPP group plus the EU with him, he might have achieved an agreement that might have been better for all, even the Chinese. As it is, what has come out is the "Nothing Burger" I have described here, with basically all parties worse off than would have been the case without this stupid trade war.

Anonymous said...

A really fine and helpful response, for which I am grateful. As for the TPP, an Asian substitute including China will be in place by this spring. China now has significantly closer Asian trade ties than when 2017 began, so a sort of TPP used to pressure China would be limited. As for slow-growth Europe, Chinese trade is too important now for more than a little pressure that would be largley based on discrimination anyway.

That leaves the United States with say UK, Canada, Japan, Australia... But, China has been pouring resources into research and development, investments, designed to make China less and less dependent on the technology of the United States and associates.

The Chinese understand the technology threat posed by the US and are not about to be limited in development.

Anonymous said...

STEM education, technology research and development, innovation are continually emphasized in China. The US is just not going to be able to limit Chinese development. US antagonism to China has been understood and necessarily so.

rosserjb@jmu.edu said...

Regarding TPP, it is in place. It just does not have the US in it, which is good for the other nations to some extent that they do not have pay high prices for American pharmacueticsls, which was part of the deal. Of course they do not have as much access to the US market they would have had otherwise, with this most significantly affecting Vietnam. I kind of saw the impending TPP as the final end of the Vietnam War, with it to end economic discrimination against Vietnam by the US that dated back to the war, but this sis not happen.

As has been noted by many most of the changes made to NAFTA in the new USMCA deal were simply items that Mexico and Canada had agreed to as part of the TPP and would have been in place if the US had stayed in the TPP. The other changes were those increasing protection for the US auto industry and opening Canadian markets for US dairy products, again Trump being interested in On Wisconsin!

Anonymous said...

What I was referring to is RCEP, * which will be in place by this spring and includes China. The TPP as a means of limiting China has been countered:

* https://en.wikipedia.org/wiki/Regional_Comprehensive_Economic_Partnership

Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement in the Asia-Pacific region between the ten member states of the Association of Southeast Asian Nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam)

Also, look to the "just" completed bilateral agreements between China and Myanmar.

Anonymous said...

http://www.xinhuanet.com/english/2020-01/19/c_138716266.htm

January 19, 2020

China, Myanmar agree to jointly build community with shared future

NAY PYI TAW -- China and Myanmar have agreed to work together to build a community with a shared future, opening a new era of bilateral ties.

Chinese President Xi Jinping and Myanmar State Counsellor Aung San Suu Kyi announced the decision during their formal talks in the Myanmar capital of Nay Pyi Taw on Saturday.

Xi said that enjoying a profound "Paukphaw" (fraternal) friendship, China and Myanmar face new development opportunities in bilateral ties as both countries have entered a new stage of national development.

This time, the two sides have decided to jointly build a China-Myanmar community with a shared future, ushering in a new era of bilateral relations, Xi said....

Anonymous said...

Myanmar is a country of about 55 million, located perfectly for international trade and has been among the fastest growing countries in the world since 2000.

rosserjb@jmu.edu said...

Myanmar (formerly Burma) was the second wealthitest nation in S.S. Asia after the Philippines when it became independent of Britain in 1948. It would eventually go into a several decade long period economic stagnation as it followed a policy of "Buddhist socialism." It has grown more rapidly in recent years and now has a per capita income about twice that of India's.

ken melvin said...

Myanmar is much a part of China's grand, center of the earth scheme, as is the belt and road.

China is applying reason while the US prattles along unfettering capitalism too dumb to realize what's going on.

Anonymous said...

https://www.imf.org/external/pubs/ft/weo/2018/01/weodata/weorept.aspx?sy=2007&ey=2020&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=26&pr1.y=6&c=513%2C518%2C558%2C522%2C924%2C566%2C534%2C536%2C524%2C544%2C578%2C548%2C948%2C582&s=PPPPC&grp=0&a=

October 15, 2019

Gross Domestic Product per capita based on purchasing-power-parity (PPP) for Bangladesh, Cambodia, China, India, Indonesia, Laos, Malaysia, Mongolia, Myanmar. Nepal, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and Vietnam, 2007-2020

2019

India ( 8,461)
Myanmar ( 7,412)

Anonymous said...

Correcting: I should not have included Singapore, which obviously has a far higher per capita GDP than any of the developing Asian countries I properly included.

I appreciated Mr. Rosser's comment on Myanmar, but wanted to correct the assertion that per capita of Myanmar is much higher than that of India:

2019

India ( 8,461)
Myanmar ( 7,412)

Anonymous said...

Clarifying: India now has a higher per capita GDP than Myanmar. Myanmar has been growing significantly faster than India in per capita terms since 2000, while Myanmar and India grew at about the same rate between 1960 and 2000.

Anonymous said...

"Myanmar is much a part of China's grand, center of the earth scheme, as is the belt and road."

Myanmar has just affirmed being part of the belt and road.

Anonymous said...

http://www.xinhuanet.com/english/2020-01/18/c_138716099.htm

January 18, 2020

Kyaukpyu port to become model project in China-Myanmar BRI cooperation
Surrounded by superb natural conditions, the Kyaukpyu deep-water port in the western Rakhine State of Myanmar, is set to become another model project under the Belt and Road Initiative (BRI) framework, benefiting both Myanmar and China.

NAY PYI TAW -- Along the Bay of Bengal on the west tip of Myanmar, the town of Kyaukpyu in Rakhine State sits tranquilly on a 25-meter deep harbor.

This deep-sea port, surrounded by superb natural conditions, could be developed into another demonstration project under the framework of the Belt and Road Initiative (BRI), mutually benefiting both Myanmar and China....

rosserjb@jmu.edu said...

This is one of these cases where nominal and PPP measures are in disagreement. Indeed according to IMF, WB, and CIA, India is now a bit ahead of Myanmar on PPP per capita grounds by a smallish amount. In nominal terms it is India at only US $ 3200 while Myanmars about twice that. Moving to PPP, Myanmar's number barely changes while India's jumps up to the 7,000-8,000 range. I do not know what is responsible for these differences between the two, although I do not think this is kind of a sideshow to the original issue of this thread (not that we have not gotten off onto sideshows in the past, and this is not too far off).

rosserjb@jmu.edu said...

Since we have gotten off onto this, I shall note that at least according to the Washington Post, there are mixed feelings in the leadership in Myanmar about this new initiative with China. The reason for this is that China has had a long history of supporting ethnic minority separatist groups located mostly in the northern part of Myanmar, especially the Shan, who are about 9 percent of the population. PRC President Xi was just in Myanmar, but it is unclear whether that is sufficient to reduce the doubts of those in the Myanmar military about China due to this past or whether Xi has promised to stop supporting those groups.

Anonymous said...

"China has had a long history of supporting ethnic minority separatist groups..."

This is the Washington Post lying, simply lying.

Chinese policy is strictly opposed to interfering in the internal affairs of other countries. This is constantly made clear and affirmed by leaders in other countries. The idea that China would support a separatist minority group in Myanmar is beyond nonsense and wildly offensive.

Anonymous said...

"China has had a long history of supporting ethnic minority separatist groups..."

A shocking horrid Washington Post lie that violates a core, repeatedly affirmed principle of Chinese foreign relations.

Anonymous said...

"The reason for this is that China has had a long history of supporting ethnic minority separatist groups located mostly in the northern part of Myanmar, especially the Shan, who are about 9 percent of the population. PRC President Xi was just in Myanmar, but it is unclear whether that is sufficient to reduce the doubts of those in the Myanmar military about China due to this past or whether Xi has promised to stop supporting those groups."

Please reference this Washington Post article when possible. I was unable to find the article which though false and offensive I would like to be able to reference for those reasons.

Thank you so much for pointing this out.

rosserjb@jmu.edu said...

Anonymous,

I have tossed my WaPo with the story, but it is simply a fact that China has at times in the past supported and armed ethnic separatist movements in Myanmar/Burma. What is probably the case is that they are not doing that anymore and siding with the central government in the effort to quell these off and on movements. The reason is that their current Belt and Road initiative involves infrastructure investments in the Kachin and Shan areas of northern Myanmar/Burma, and the guerrilla activities of these groups are disrupting those investments. The Chinese have recently been trying to play a mediating role between the central government and these groups. But there is a lot of uncertainty and ongoing mistrust based on past activities.

For sources I suggest you look at the Wikipedia entries on "China and the Kachin State" and "China and the We Army." I am reasonably certain that China is currently not ssupporting these separatist groups, but reportedly most of their arms, especially for the Shan-state-based We aremy, are from China as a result of their past support for them.

I am sorry if this goes against your firm beliefs, but the US, China, Russia, and some other major nations are not always completely honest about their activities supporting groups in other nations.

Anonymous said...

"I have tossed my WaPo with the story, but it is simply a fact that China has at times in the past supported and armed ethnic separatist movements in Myanmar/Burma...."

Possible articles:

https://www.washingtonpost.com/world/asia_pacific/when-xi-met-suu-kyi-china-embraces-myanmar-as-western-nations-pull-back/2020/01/17/04dfc4b6-373c-11ea-a1ff-c48c1d59a4a1_story.html

https://www.washingtonpost.com/business/chinese-president-heads-to-myanmar-for-crucial-state-visit/2020/01/16/26b35646-38d8-11ea-a1ff-c48c1d59a4a1_story.html

Anonymous said...

"I have tossed my WaPo with the story, but it is simply a fact that China has at times in the past supported and armed ethnic separatist movements in Myanmar/Burma...."

I am sure you are correct, since you are stating a "fact," but so far I can find no supporting evidence on the internet. Since interference in the internal affairs of Myanmar would directly contradict current Chinese foreign policy, need to have a supporting reference. There was no hint of such a problem raised during President Xi's visit to Myanmar, and reliable reports of the trip accomplishments are highly positive.

Anonymous said...

An "interesting" coincidence given this discussion; President Trump is evidently going to prevent people from several more countries from coming to the US, among those countries is "Myanmar." I have no idea what could have brought this on, but possibly I am just lost about all this.

Anonymous said...

Why ever would we ban travel to the US from Nigeria or Myanmar? What am I missing?

rosserjb@jmu.edu said...

Anolnynous,

This is beginning to become pointless.

Please read the Wikipedia entries I mentioned. China is not currently supporting the ethnic separatists in Myanmar. But it has done so in the past, and various parties in Myanmar remain unhappy and lacking in trust of the Chinese leadership because of this.

Also, I have no idea why you are now dragging Nigeria into this. I am not going to get into any discussion about that. This has now simply gotten way too far off into pointless obscuranta from the main point of this thread. It is beginning to look like a thread invaded by our old friend, Egmont.