Is a trade deal with China just around the corner? The White House announced this morning that an “enforceable trade deal” is now in sight after “constructive” talks with China in Shanghai. In a key concession, China has agreed to open its market for more American agricultural imports, which would be a huge win for farmers in the Midwest.
That is, if China gets pinned down to that position:
Update from the White House on the Shanghai talks: "The Chinese side confirmed their commitment to increase purchases of United States agricultural exports. … we expect negotiations on an enforceable trade deal to continue in Washington, D.C., in early September" pic.twitter.com/UkBLUrIapU
— Alayna Treene (@alaynatreene) July 31, 2019
China has “affirmed” this position in the past, too. The trick is getting them to solidly commit to it as part of an overall enforceable trade agreement. That’s a word that appears in the announcement for a reason, hinting that this will be a black-letter clause in the agreement with which China is prepared to comply.
Olivier Knox wants to know whether that compliance will come in the form of national open-market policies, or just waivers granted to individual importers as need arises:
At this point in time, what's the substance of this "commitment"? China says it's demand from individual companies (which have applied for exemptions from Chinese tariffs on US ag goods), suggesting it's not some national position. pic.twitter.com/vog7sBy81k
— Olivier Knox (@OKnox) July 31, 2019
China’s statement at the end of the talks acknowledged discussion on agricultural sales but offered no hint of an agreement on this point. It sounded less optimistic and specific than the White House’s readout too, and included a jab back at Trump over his Twitter threats to walk away from the talks:
“Both sides, according to the consensus reached by the two leaders in Osaka, had a candid, highly effective, constructive and deep exchange on major trade and economic issues of mutual interest,” China’s Commerce Ministry said in a statement shortly after the U.S. team left Shanghai.
The statement said negotiators discussed more Chinese purchases of agricultural products from the United States, which had become a bone of contention after U.S. President Donald Trump said China had not delivered on promised purchases. …
“I believe it doesn’t make any sense for the U.S. to exercise its campaign of maximum pressure at this time,” Hua told a news briefing in response to a question about the tweets.
“It’s pointless to tell others to take medication when you’re the one who is sick,” she said.
As CNBC pointed out, agriculture was not necessarily the toughest conflict to resolve anyway. That was expected to be one of the “goodwill gestures” from the Shanghai meeting, with the real problems yet to be resolved:
The Shanghai talks were expected to centre on “goodwill” gestures, such as Chinese commitments to purchase U.S. agricultural commodities and steps by the United States to ease some sanctions on Chinese telecoms equipment giant Huawei Technologies Co Ltd, a person familiar with the discussions told Reuters earlier.
Those issues are somewhat removed from the more core U.S. complaints in the trade dispute, including Chinese state subsidies, forced technology transfers and intellectual property violations.
That hints at the signals we can expect to see from the US between now and the resumption of talks in September. If the Trump administration backs off on Huawei and other Chinese firms in the tech sector, then the commitment from China is likely more solid than Beijing is hinting at here. If nothing changes, then the “goodwill gestures” didn’t actually materialize, at least not in any significant way.
Trump will have to figure out just how much he wants to play hardball in this fight. China presents perhaps his biggest risk and biggest potential upside in the 2020 election. If he can hammer out an enforceable trade deal with Xi Jinping before the spring, Trump not only gains credibility but also solidifies a high-growth economy heading into the election. If, on the other hand, Trump can’t get a deal, a protracted trade war will eat away at his economic argument — and it will hit the Midwest hardest of all, where Trump’s populist base is critical for his re-election. That’s why Trump needs to promote what may or may not be a completely firm commitment from China to increase ag imports now, to earn some extra time to get the rest of a deal nailed down. That deal had better be coming sooner than later if Trump wants to protect his best argument for another term.