As I read this piece at The Hill by Arthur Dong on the emerging trade deal with China, I had a number of thoughts which I thought I’d share. I wonder if Professor Dong or the U. S. trade representatives realize what an enormous pile of codswollop this is:
While the trade settlement has not been formally announced, it is anticipated that China may modify its stance on some key U.S. priorities, namely:
- China agrees to purchase more U.S. goods and services including energy and agricultural resources;
- China agrees to open its domestic economy to greater foreign investment and reduced barriers to trade;
- China agrees to open its cloud-computing sector to outside companies;
- China agrees to enforce intellectual property rights and eliminate the requirement of sharing technology as a condition of entry; and
- China agrees to an enforcement mechanism.
In the absence of a robust system of civil law in China, that’s a big pile of nothing. China will enforce the intellectual property rights of U. S. companies or “purchase more U. S. goods and services” for precisely as long and in precisely the quantities desired by the Chinese Communist Party or in other words President Xi who seems to be its Supreme Leader at this point. China is large enough that other than a few Potemkin deals that means nothing.
There are ways of addressing the intellectual property issue completely within the United States where there is a robust system of civil law. For example, any publicly-held U. S. company that surrenders its intellectual property for whatever access to the Chinese market they are deigned to acquire, as is their right should be required to report it to the U. S. federal government and all of that company’s intellectual property present and future should be deemed released into the public domain. Problem solved. Chinese espionage is another story. The federal government needs to take Chinese espionage much more seriously than it does.
As far as China’s managing its trade, imposing tariffs is the right solution. Until China’s economy is completely open to foreign competitors including its banking industry, we should impose tariffs in the amount of our trade deficit with China. Again—problem solved.
I would urge patience and caution in predicting the outlines of any agreement; simply put, very few (including Xi, Trump) in the past year has predicted events went the way they did (that tariffs were applied to half of Chinese exports, the sharp drop in financial markets in Dec, followed by a quick rise).
I agree with the rest of the article — that the change in sentiment towards China is broad, things won’t be as “easy” for the Chinese government as the last 25 years, that the change from exports to a more consumption based economy is appropriate given the stage of development but poses challenges for how the CCP stays in power.
I think you can get a decent agreement with them. Enforcement will be the issue.
Steve
That’s kind of my point. Enforcement is impossible.
We can, however, change our own behavior and should.
CuriousOnlooker:
The primary objective of Chinese policy has always been keeping the CCP in power. It was the reason it supported ending the policy of autarky. It was the reason that they expanded the export trade.
I think they recognize that they can’t turn towards consumer-driven growth without relinquishing control. Will they allow that to happen? Will they reverse course? Some of each? Neither? Stay tuned.
My emphasis is on the U. S. changing its own behavior. I don’t think we can count on Xi’s good will.
The interesting thing is the current set of policies of export driven growth have about run their course; it won’t cause living standards to double from here. And that presents a problem to the CCP since growing living standards has kept a lid on popular discontent. Whatever the CCP does it will be a risk.
As to the US changing its own behavior – it’s definitely happening.