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Local Viewpoints

China Not Adhering to Trade Deal

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Commentary:

In the January 2020 U.S.-China trade agreement, which was spearheaded by the Trump Administration, China agreed to purchase an additional $200 billion of U.S.-made products and services, using 2017 as a base year, by the end of 2021. By agreeing to this, China was committing itself to purchase a record amount from the U.S. At the time, Trump and his supporters touted this agreement as a major breakthrough in China trade. Lauding the agreement, Trump called Chinese President Xi Jinping his “very, very, good friend.” Having followed China’s international diplomatic and trade policy for 30 years, I was skeptical at the time that it would adhere to the agreed-upon terms. Two years later, my skepticism is being proved right.

The end of 2021 has come and gone, and according to Chad Brown, a senior fellow at the Peterson Institute for International Economics, China did not even come close to its commitment. In order to reach the extra $200 billion target, U.S. purchases by China would have required $227.9 billion in 2020 and $274.5 billion in 2021, or a total of $502.4 billion during the past two years. In publishing his analysis of the trade data, Brown noted that China only reached 57 percent ($288.8 billion) of this total.

China could point to the pandemic and make the argument that the world economy tanked in 2020, as industries were shut down and jobs were lost or mothballed. However, 2021 showed strong recovery from year one of the pandemic. Sectors such as automotive, agriculture, and consumer products grew to the point that supply chains were disrupted and long waiting lists for a variety of items developed. Yes, a pandemic and an ensuing economic recession occurred. However, if there is one country in the world with enough cash reserves to make record purchases, it is China.

China’s lack of adherence to the trade deal repudiates one of the Trump Administration’s strongest foreign policy moves. However, did anybody really think that China was going to keep its word on the deal? I got the feeling that China was simply appeasing Trump with the belief that he would be gone soon, and the agreement would be forgotten in the U.S., whose citizens seem to have a short memory on issues such as trade. China is very good at using time to its advantage.

This is a country that bullies countries around the world, and if they complain they punish them through economic means. This is a country that abuses its own minorities such as the Uyghurs and lies to the world press about its actions. This is a country that has used prison and child labor to manufacture products that it subsidizes to break into global markets. This is a country that uses its powerful economic weight as a weapon. So, are we really surprised that China is not keeping to its agreement with the U.S.?

What is the solution in dealing with China and its unwillingness to deal with its swollen trade surplus with the U.S.? Should the U.S. increase tariffs on the remaining Chinese imports that haven’t been slapped with tariffs? Should goods that were assessed stiff tariffs be assessed even higher tariffs? These actions would exacerbate the existing inflation problem in the short- and medium-term. Poorer Americans that are forced to shop at discount stores such as Family Dollar would suffer the most, as so many of the products for sale originate in China. And does anybody not believe that China would retaliate if higher tariffs were imposed?

Our government must not be silent about China not keeping its trade promises. Too many American entities and people have self-censored when having spoken critically about China. Remember Houston Rockets General Manager Daryl Morey who tweeted his support of the Hong Kong protestors fighting against Chinese oppression? He quickly removed his tweet, most likely because the NBA sees China as a lucrative market. This is the problem – money seems to be more important than standing up to what is right with China. If China didn’t meet its obligation with the U.S., then the rest of the world must know in uncertain terms that entering into agreements with that country may amount to little or nothing. The U.S. must also keep diplomatic pressure on China to step up its purchases.

We need to be serious about producing products in North America so as not to be so vulnerable to China as a supplier of consumer and industrial goods. China is not a U.S. ally, and has grown rich off of producing and selling products to the American public. I say North America, because we need to maximize our trade relationship with both Canada and Mexico, which are allies. So many products that are produced in these countries have U.S. components or materials input. The long-term strategy of producing more with our allies will allow the U.S. to be less reliant on China, which will give it less leverage over trade-related issues, and this is what that country fears the most.