Why U.S. and China are still ‘very far away’ from ending trade war

As we reported, the Trump administration and
China today announced phase one of a deal to de-escalate the trade war between the world’s
two largest economies. But the agreement has produced many questions
and criticism. Nick Schifrin is here with that story. NICK SCHIFRIN: Judy, the Trump administration
portrays this deal as a major victory that could lead to fundamental change by China,
at little cost to the U.S. A senior administration official said China
had agreed to structural reforms on behavior that’s long concerned the U.S.: intellectual
property theft, forcing U.S. companies in China to transfer their technology, and currency
and foreign exchange manipulation, among others. And China committed over the next two years
to purchase $200 billion in American agriculture, manufacturing, and energy products. In return, the U.S. dropped a new round of
tariffs scheduled to take effect on Sunday, and reduced a previous round of tariffs. All told, the changes would affect more than
$350 billion worth of goods. To talk about this, I’m joined by Mary Lovely,
professor of economics at Syracuse University and senior fellow at the Peterson Institute
for International Economics. Welcome to “NewsHour.” Thanks very much. MARY LOVELY, Syracuse University: Thank you,
Nick. NICK SCHIFRIN: We can’t read the actual deal
yet, but the administration describes this as something, very significant, in fact. How do you assess the significance of this
deal? MARY LOVELY: Well, I think, on net, it’s good
news in the short run for the American economy. We have some lifting of the tariffs. We have a deal. And the longer this went on, it seemed the
more it was a drag on business confidence. GDP growth has been held back by really a
major slowing down of business fixed investment. And so we’re hoping that businesses will see
this as potentially a pathway to trade peace and begin to invest again. Of course, the tariffs have kind of thrown
their plans for where they’re going to get their supplies and where they’re going to
sell. And so at least a little bit of certainty
on that is good. NICK SCHIFRIN: Let’s look at some of the specifics. The administration is claiming China’s agreed
to fundamental reforms, most notably, intellectual property theft, forced technology transfers. These are things the U.S. has long complained
about. Is there any indication that China is actually
willing to deliver fundamental reforms? MARY LOVELY: Well, China has been making changes
in its law. And I think we’re going to see a lot of those
changes sort of packaged in this with a nice bow put on top. So, for example, intellectual property, it’s
been tightening both the law, the ability to police it, how those things are adjudicated. An important step they took last year was
to create — like, we would think of it as an appellate court at the — at the central
government level, because a lot of these concerns happen at the local level. And one of the big complaints American businesses
have had is that we can’t have the same guys at the provincial level, who are part owners
in the business that we say is stealing our stuff, deciding whether or not that theft
is actually happening. So now there’s another level that those businesses
can take these claims. So, on that, China was already doing things. On forced technology, they created this new
foreign investment law last January, which clearly states that foreign investors need
to be free of any kind of coercion on their technology. So a lot of these things we’re happening,
at least on paper. NICK SCHIFRIN: The administration says that
China is going to buy $40 billion to $50 billion of agricultural goods this year and next year. We got a statement today from a group Farmers
for Free Trade questioning that, hoping that — quote — “This is not an empty political
process — promise.” Is there any indication that China can and
wants to purchase that many goods from American farmers? MARY LOVELY: Well, frankly, I’m surprised
that the totals are that high. The maximum amount of agricultural exports
that we have ever sold China was in 2017. And it was about half of that. So, it was 27,000. So a little — $27 billion — I’m sorry — it
was about half of what the maximum amount is here, $50 billion. So it’s really hard to see where they’re going
to put them. Plus, the Chinese economy has been slowing,
which would slow the demand. NICK SCHIFRIN: There has been political criticism
today of this deal. We can show a tweet by top Democrat in the
Senate Chuck Schumer — quote — “President Trump has sold out for a temporary and unreliable
promise from China to purchase some soybeans.” Is the Chinese promise temporary and unreliable? MARY LOVELY: Well, I think Senator Schumer
believes that this trade war would have led to better outcomes. I personally do not think that is true. This is not the way to get change in China. We are seeing dramatic changes in the political
system in China, a massive increase in the role of the state, a lot of investment going
into state-owned enterprises. We’re seeing political repression in many
ways. Those are changes the U.S. has to deal with
in a smart way. This blunt-force instrument wasn’t getting
us anywhere. It was hurting American consumers, hurting
American businesses. What are we getting out of it? I’m not sure what Senator Schumer thinks about
we were — we were going to go, but I didn’t see this going anywhere in a positive direction. So I’m happy that we at least called the cease-fire
today. NICK SCHIFRIN: So the hurdle for phase one
has been high. And phase two is even bigger, right, I mean,
more fundamental reforms. How far are we away from the end of the trade
war? MARY LOVELY: So I think we’re very far away
from the end of the trade war. What we packed into phase two are the difficult
things, industrial subsidies in particular, since this is — these subsidies are fundamental
to China’s development plans, to reorienting its economy toward higher-wage, higher-capital-intensive
activities, and moving into the so-called emerging technologies like electronic vehicles. We also left aside issues having to do with
market access, having a level playing ground for our tech companies, for our financial
companies. Those are going to be very difficult. They’re going to move into other issues, including
censorship of the Internet, Chinese control of their own financial markets, and national
security. And we know those are going to be tough. NICK SCHIFRIN: And so not a lot of progress
before the election in the U.S., probably? MARY LOVELY: I do not think so, no. NICK SCHIFRIN: Mary Lovely of Syracuse University
and the Peterson Institute for International economics, thank you very much. MARY LOVELY: Thank you.

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