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Opinion: Phase one trade deal doomed to fall short

Tom Watkins

U.S. and China leaders plan to sign the “Phase One” trade deal today at the White House, two years after a trade war begun by President Donald Trump that threatened to cripple existing trade between the two countries.

Presidents Trump and Xi must work together to form a transformational trade deal that establishes the U.S. and China on equal footing, Watkins writes.

American consumers, taxpayers, farmers and manufacturers have paid a heavy price to get to this point — and have gotten little in return. Economists warn it might take years for the full consequences of the deal to be realized, given that most Chinese imports remain subject to U.S. tariffs. Taxpayer subsidies of $28 billion were doled out to farmers in an attempt to help temper the economic losses brought about by the trade war.

While the deal is the first full lull in the trade war, the agreement is viewed by many as “underwhelming.”

While I have disagreed with many of the tactics Trump has used these past two years in this tit-for-tat trade war, I concur with his goal in restructuring our relationship with China.

In order to further open Chinese markets for U.S goods and services, we must address many things, including China's theft and forced transfer of U.S. intellectual property; their currency manipulation and product dumping. In addition, we must address subsidies that unfairly benefit Chinese state-owned companies. 

While the Phase One deal has not been made public, it would allegedly boost Chinese purchases of U.S. agriculture, energy and manufactured goods to $50 billion per year, open the China's financial sector, stop the devaluation of the Chinese currency, and protect U.S. intellectual property. In turn, the Trump administration would cancel or reduce import tariffs on Chinese goods.

At the moment, however, these are loose premises with very few teeth.

Before the deal has even been signed, it has already been reported that China’s vice minister of agriculture and rural affairs said China would keep grain import quotas unchanged, despite the promise to buy more American farm products.

In my estimation, the Phase One deal may have calmed the economic markets and proved positive in the short term by boosting American savers’ retirement accounts. But it has failed to accomplish the president’s original goal, his rationale for starting the trade war in the first place.

Being angry with China for their unfair trade practices and responding with unilateral tariffs seemed reactionary in driving U.S.-China policy.

We need to find smart, mutually respectful, win-win solutions to the trade dispute between our two countries — a sustainable solution that benefits the people of America, China and the global economy. Both sides must proceed with the understanding that no agreement can stand the test of time unless both sides are equally invested in its success. This dispute cannot continue to proceed like a playground game of see-saw — one nation down for the other to be up.

How our respective leaders address and attempt to resolve current and future challenges (e.g. Iran, North Korea, climate change, the global economy) will impact not only the people of America and China, but all humanity. 

There's no denying China is on the rise. No one can afford to be naive about the current era of competition between the U.S. and China. The era of total U.S. world domination, simply expecting China and the world to follow our demands, is over.

In the future, the U.S. must learn to simultaneously foster collaboration and competition.

The Phase One trade deal is transactional at best when what we desperately need is a transformational deal — one that resets our international relationship with China on more equal footing. 

For the sake of Americans, Chinese and people across our globe who have been hurt by this tit-for-tat trade war, we can only hope for a soon-to-be negotiated sensible Phase Two plan.

Tom Watkins’ lifelong interest in U.S.-China relations has directed his work the past four decades in building cultural, educational and economic bridges between our two nations. Watkins is former Michigan state superintendent of schools and president-CEO of the Economic Council of Palm Beach County, Florida.