Of all the desperation- and Trump Derangement Syndrome-fueled arguments used to disparage the President’s new “Phase One” trade deal with China, one stands out as especially silly. It’s the complaint that the agreement hasn’t secured Beijing’s agreement to change its laws permitting the various predatory trade and broader predatory commercial practices that China is using to seize world leadership in key advanced industries and technologies, or otherwise promise verifiably to halt them. (Senate Democratic leader Charles Schumer of New York has been particularly outspoken on this point.)
And the complaint isn’t silly simply because the very title of the deal – Phase One – makes completely clear that it was never meant to once and for all solve all the grave problems that Chinese predation has created. It’s mainly silly for two reasons. First, the absence of anything remotely resembling rule of law in China means that Chinese promises to change laws and regulations and even actions to change what’s on paper could not be less important.
For China’s system is based on the arbitrary exercise of power That is, by definition, its dictators and the bureaucracies they run feel absolutely no obligation to adhere to whatever text happens to be on paper at a given moment. In fact, one of the main purposes of publishing these fake measures is to keep outsiders ignorant of the practices both of the central government and of the various layers of sub-national government – i.e., the situation on the ground, and what needs to be done to become or remain viable in China.
Second, thanks to Phase One’s actual terms, whether the Chinese do or don’t change their laws, and even their practices, matters little now. That’s because the stiff remaining tariffs on massive amounts of Chinese goods intended for American customers effectively deny Beijing the ability to turn its technology extortion into advantages in the U.S. market – the market it needs to access and dominate in order to realize its ambitions. Indeed, the highest remaining tariffs (25 percent) penalize the very high value products targeted by the Made in China 2025 program that’s carrying out Beijing’s plans.
Moreover Phase One’s dispute-resolution and enforcement system – which ingeniously and crucially establishes a de facto American last word – goes far toward preventing China from using Made in China 2025 to turn its predation into advantages in the China’s own large market, either. If it makes the attempt, American victims can take their cases to the Washington, which enjoys broad authority under the deal to hike duties on key Chinese products even higher – and without fear of tit-for-tat Chinese retaliation. China’s only legal option is pulling out of agreement entirely – which given its continuing heavy reliance on accessing the American market, would amount to cutting off more than its nose to spite its face.
Thoughtful criticisms of Phase One have come from some quarters. Further, as I wrote in my initial assessment of the dispute-resolution system, realizing its benefits for the United States will require American leaders to show major poker-playing skills – which shouldn’t be taken for granted under the Trump administration, let alone under future Presidents. Neither development is guaranteed. But Phase One critics genuinely seeking to make certain that it works for the United States should focus on identifying actual weaknesses rather than trying to portray successes as failures.