Yesterday’s Financial Times contained the latest in a long string of press reports – often coming after similar administration pronouncements – that the United States and China are close to concluding a deal that will resolve much and even most of their current trade conflict.
Even with Chinese Vice Premier Liu He currently in Washington, D.C. for the second round of high level talks within a week, heaven only knows if it’s true, given President Trump’s unpredictability; given the repeated (but again, only reported) postponements of a summit between Mr. Trump and his Chinese counterpart, Xi Jinping; and given how fundamental disagreements about enforcement seem to be among the final remaining obstacles.
Nonetheless, this most recent news provides as convenient an opportunity as any to review why enforcement will be not only difficult, but so difficult that it’s tough to see how a system satisfactory form the U.S. standpoint can be created.
In the first place, problems I’ve identified from the start (see, e.g., most recently, this op-ed) remain firmly in place. Chiefly, the Chinese regime has always prioritized keeping its own people in the dark about its policies and practices. That’s why it not only has never created any means of providing transparency and accountability to the Chinese public. Because they understand that knowledge is power, and because maintaining power is its paramount goal, Chinese leaders emphatically reject such principles. And if Beijing is so determined to keep secrets from its own compatriots, why would it share such knowledge with foreigners?
China’s secretiveness and equally strong rejection of Western-style rule of law also mean that the regime’s most important decisions aren’t written down even for most Chinese to see, much less foreigners. And what is written down is typically too vague to be informative. So good luck trying to document Chinese violations of any agreement.
To its credit, the Trump administration appears aware of these difficulties – which is why what it’s divulged about its enforcement proposals depart from the standard American approach of relying on the World Trade Organization (WTO) to resolve disputes and, more important, insist on some degree of American unilateral authority to punish transgressions with tariffs (rather than giving China any authority to block such moves).
Unfortunately, the Trump enforcement approach still looks incapable of promoting and defending American interests adequately. Take the new wrinkle mentioned in the Financial Times piece: “One possible [enforcement] compromise could involve a gradual lifting of US tariffs [imposed in recent months by President Trump] based on specific triggers and implementation dates….” China’s aforementioned secrecy raises major questions concerning how those triggers (presumably Chinese steps to come into compliance) would be identified. And it’s clear that, so far, Beijing isn’t on board even with this questionable idea.
Congressional testimony by the chief U.S. trade negotiator, Robert Lighthizer, revealed similarly flawed American ideas. According to this summary, Lighthizer told the House Ways and Means Committee in late February that “The US and China have agreed to an enforcement mechanism” that “would consist of monthly meetings at the office director level, quarterly meetings at the vice-ministerial level and semi-annual gatherings at the ministerial level, with these last meetings convened by Lighthizer and…Liu He, the top US trade negotiator testified….
“Lighthizer said the deal-enforcement meetings would allow government representatives from both sides to raise concerns and get them addressed. The meetings would be a chance for Washington to air complaints about any systemic problems, and to pass on any specific grievances issued to the US administration from American companies, he said….If the problems ended up at the ministerial level and could not be resolved there, then the US ‘would expect to act unilaterally’, he said. ‘Proportionally, but unilaterally.’”
But the very complexity of this structure indicates that China is going to enjoy substantial opportunities to haggle for months over any accusations – and possibly long enough for circumstances to change enough to render eventual American tariffs moot.
Ironically, moreover, the Chinese are also likely to take advantage of an American attempt to overcome one of the longest standing hurdles to enforcing deals with Beijing effectively: U.S. companies’ well-founded fear of facing Chinese retaliation if they accuse China of predatory practices publicly. On the one hand, the Trump administration’s stated willingness to bring anonymous corporate complaints would appear to solve the problem by shielding these firms. On the other, what could be easier than for Beijing to respond that it can’t fix a specific problem that an accuser’s anonymity prevents it from identifying precisely?
Finally, Lighthizer’s emphasis on proportional responses both makes any punishments eminently bearable by the Chinese economy, and belies his (accurate) description of many predatory Chinese practices as “systemic.” After all, precisely because they’re systemic, by definition they’re both widespread and approved by the Chinese government. Responding in a limited, indeed tit-for-tat, manner will almost certainly be seen by Beijing as a green light to continue violations of the agreement provisions in question everywhere else possible.
As a result, nothing known about the Trump administration’s enforcement strategy should give anyone confidence that satisfactory enforcement is possible. Which should be no surprise to anyone who’s been monitoring U.S.-China trade and commerce in general dispassionately. Decades of experience should by now have clearly taught the lesson that, at least under the present Chinese regime, mutually beneficial economic ties were never possible. It makes just as little sense to suppose that Beijing will agree to a mutually beneficial enforcement system, either.