New alliances, not tariffs, are key to US trade strategy on China

Name: Unpacking the ‘phase one’ deal for the US-China trade war
Uploaded: 2021-01-14T21:15:25.000Z
Duration: 7 min 38 s
Description: Unpacking the ‘phase one’ deal for the US-China trade war

To induce better trade policies in China, multilateralism is the only effective approach. By building alliances and consensus among like-minded nations, the US can rebuild and strengthen the rules of the road for China to observe

Reading Time:4 minutes

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US President Donald Trump shakes hands with President Xi Jinping during a meeting on the sidelines of the Group of 20 summit in Osaka, Japan, on June 29, 2019. The phase one trade deal Trump secured after years of confrontational, tariff-focused dealings with China has yet to live up to its promises. Photo: AP

Spencer CohenandBadri Narayanan

Published: 5:15am, 15 Jan 2021Updated: 6:05am, 15 Jan 2021

The phase one trade deal, signed on January 15, 2020, was lauded by the Trump administration as a breakthrough in the long-standing impasse in US-China trade relations. It is not. Setting aside the impact of the pandemic on global trade flows and hindrance to the deal’s success, it was flawed from its inception as a bilateral agreement.

The failure follows on the heels of a trade war that has harmed US households, farmers, manufacturers and exporters. President-elect Joe Biden’s administration should not overtly rescind the deal but let it sail into the sunset, along with the ineffective trade policies of the Trump administration, and start anew.

For starters, the deal has not met its trade targets. The signature element was China’s agreement to increase purchases of US goods and services by US$200 billion above 2017 levels during the next two years. This included a US$76.7 billion increase in US exports of goods and services in 2020 compared with 2017 levels, the last year before the trade war.

Goods exports, a more easily measured form of international trade transaction, were expected to reach US$154.4 billion by the end of 2020. Services take longer to measure and report.

As of October, cumulative US goods exports included in the trade deal had reached US$67.8 billion. On a pro-rata basis, factoring in seasonality and trade patterns in recent history, goods exports were down 47 per cent through the first 10 months.

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Unpacking the ‘phase one’ deal for the US-China trade war

Why has the deal not worked? The proximate cause is certainly the coronavirus pandemic, rattling supply chains and depressing Chinese demand for US goods. China’s GDP, after a sharp contraction in the first quarter, is projected to grow 1.9 per cent for 2020, down from a pre-pandemic forecast of nearly 6 per cent.

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