Opinion: Trump negotiated a bad China deal. It’s expired – but still confusing, Biden does not give up
Opinion: Trump negotiated a bad China deal.  It’s expired – but still confusing, Biden does not give up

Opinion: Trump negotiated a bad China deal. It’s expired – but still confusing, Biden does not give up

Among the gruesome failures of US foreign policy in recent years is a notable one the so-called US-China Phase 1 trade agreement, which quietly expired on the last day of 2021. Confusingly, it seems that the new administration is still trying (in vain). ) to convince China to fulfill its obligations even though the defective agreement has expired.

The Phase One trade agreement is a textbook example of how the United States managed to create leverage, lost it, messed up, and ended up worse off. It is time for the US to abandon the agreement and decide how to rebuild leverage with China and other trading partners through a strategic trade policy geared to support US competitiveness.

When the Phase 1 agreement between the United States and China was signed in January 2020, the agreement served a single purpose – to fulfill the Trump administration’s desire to simply have an agreement.

It was not structured to provide the massive structural changes needed in China’s trade position with the United States and the world, or in its economic model. In fact, China had the luxury of reaffirming past commitments such as intellectual property and forced technology transfer, which China ultimately barely fulfilled. 60% Overall.

Specifically, China bought 62% of the manufactured products, 76% of agricultural products, and only 47% of the energy products it undertook under the agreement. China’s purchases fell 16% for goods not yet covered by the agreement and which account for almost 30% of trade between the United States and China.

In addition, steep US tariffs are on the rise 66% of Chinese imports and China’s own duties of over 58% of U.S. imports remain in place.

With all the initial hype surrounding the deal from the Trump administration and the Biden administration’s subsequent embrace of the deal, why did neither Trump nor Biden enforce it? Because the agreement contained no real enforcement mechanism and China had all the leverage.

While President Trump admittedly brought China to the table in a way that no previous government had been willing or able to do, China understood that Trump needed a deal politically. Beijing played along while knowing the deal was free and would never be realized.

The agreement contained a political escalation path, but none of the US authorities took advantage of its opportunities. Probably the Trump administration wanted to avoid an admission of failure regarding one of its signature achievements.

A year later, the Biden administration is still unable to formulate a coherent China policy, and its trade policy is hampered by US political dynamism. Only recently has US Trade Representative Katherine Tai and others in the current administration mentioned that they are sticking to China in the agreement.

This disastrous result has given China the upper hand in future bilateral trade and has left the United States weakened. It confirms that no matter how big the United States is, it cannot handle the challenges that China poses to the international trading system alone. It has also shown that creating the unfortunate precedent for controlled trade is not a winning strategy.

The Phase One agreement was also a setback for everything the United States has fought so hard to support and guarantee for the past 70 years. American leadership has been instrumental in the creation and functioning of a non-discriminatory, open, and rule-based system that is consistent with American values ​​and that encourages American and global growth and flows of people, ideas, investment, and trade. The extent to which the agreement differed from previous US practice cannot be overstated.

The only way the US can get out of this situation with grace and gain leverage with China and other trading partners is by having a genuine global trading strategy.

A key principle of U.S. trade policy should be to raise the cost of non-compliance with China and others and create incentives for constructive participation in and compliance with global trade rules.

The United States needs to conclude high standard agreements on a multilateral, regional or bilateral basis in order to raise standards and create accountability both within and outside this framework. Agreements should not be interrupted for political expediency without regard to consequences or precedent. They should be thought-provoking bottom-line exercises to strengthen US competitiveness.

The United States should deepen its trade relations with allied and like-minded countries through an aggressive free trade agreement policy. The Biden administration’s efforts to set in motion the US-EU Trade and Technology Council and the Indo-Pacific Economic Framework are a good start, but should go beyond simple executive agreements. These should be respected as free trade agreements – which require cooperation with Congress – and include rule-based enforcement.

It’s time to move on, learn from past mistakes and avoid the pitfalls of the Phase 1 agreement between the US and China.

Neena Shenai is a nonresident fellow at the American Enterprise Institute. She is also a Global Commercial Attorney in Washington, DC

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