Unequal Deal

TRUMP’S “PHASE ONE” TRADE DEAL LEAVES CHINA WITH MASSIVE ADVANTAGE
One of the key reasons Trump launched his trade war has yet to be resolved.
BY BESS LEVIN

Donald Trump denies leading a pressure campaign on Ukraine in remarks to the press outside the White House November 20.

Back in October, financial markets and other interested parties woke up to the exciting news that, according to Donald Trump, the United States had reached a “very substantial phase-one deal” with China, constituting the first step in a series of steps that would hopefully end the longtime trade war with Beijing and make the pain that American farmers, companies, consumers, and the economy at large had suffered over the last two years all worth it in the end. 

Like most Trump proclamations, though, this one turned out to be a lie. 

We knew this both in real time, as news outlets reported that China wanted another round of talks before even thinking about signing “phase one” of the trade deal and on Tuesday, it was made yet more clear when Trump again announced striking a phase one deal—more than two months after he’d already claimed one had been clinched:


Donald J. Trump
✔@realDonaldTrump
I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15. The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!
94.4K
3:16 PM - Dec 31, 2019


While Trump has lied about negotiating a deal with China numerous times by now—in December 2018, he bragged to reporters that he’d struck an “incredible” deal with Xi Jinping that blew up in his face less than 24 hours later; in August, a breakthrough call with China turned out to be fictional—at this point, there’s no suggestion that he is, once again, just making shit up as he goes along. That’s the good news.
The less-good news?
His big, terrific phase one deal appears to accomplish very little, and on a matter that both the president and his top advisers have said is crucial to bringing fairness to the markets, literally no progress has been made. 

Per the Washington Post:
President Trump’s trade deal with Beijing leaves untouched the marriage of business and government known as China Inc. that American executives for nearly two decades have said tilted global markets against them. 
Trump insisted for months that he wanted to resolve all outstanding trade issues with China in a single, comprehensive accord that would refashion the Chinese state’s economic role. 
As late as September, he rejected talk of a partial agreement, saying instead that he wanted “the big deal.” 
The two sides discussed industrial subsidies in the early rounds of negotiations over an agreement that exceeded 150 pages. 
But Chinese officials resisted making structural changes, and by the time officials settled this month on an 86-page partial accord, any commitments to reduce subsidies had been excised.

Chinese steel mills, solar panel manufacturers, electric battery developers, shipbuilders and oil producers all benefit from a vast web of government support. 
Officials in Beijing arm Chinese companies against their foreign rivals with discounted loans from state banks, cheap land, low-cost electric power, and cash infusions from officially approved investment funds...
China now devotes more than 3 percent of its annual output to direct and indirect business subsidies — a share of the economy that is roughly equivalent to what the United States spends on defense, according to economist Nicholas Lardy of the Peterson Institute for International Economics, a nonpartisan research group.
Some of that aid is similar to programs in the United States and other advanced nations, encouraging companies to retrain workers, use less energy or otherwise support government goals. 
But much of it is divorced from any consideration of profit and loss. 
So it fuels excess production of goods like steel, which spill into global markets, depressing prices and making it hard for American companies to compete. 
Trump last year imposed tariffs on steel after the Commerce Department warned that the U.S. share of global production had fallen by nearly two-thirds since 2000, under pressure from heavily subsidized Chinese mills. 
At the same time, signs that China was lavishing state aid on efforts to supplant the United States as the global leader in advanced technology triggered Trump’s decision to launch his trade war with Beijing.
In a report published last year, Robert Lighthizer, Trump’s top trade negotiator, said that government subsidies were a major element of China’s plan to surpass the U.S on technological leadership.
China is “grossly subsidizing and taking over our markets,” he insisted to the Senate Finance Committee this summer. 
And yet!
White House officials have acknowledged that some key issues remain unresolved.
Lighthizer has said “a lot of hard things” have been left to future talks, which most analysts say will be arduous and unlikely to bear fruit before the November election.
Bargaining over industrial subsidies is expected to be particularly tough. 
Though Trump launched the trade war to get China to change practices including its numerous subsidies, the commercial conflict has only convinced Xi to accelerate efforts to become self-sufficient — no matter the cost.
In other words, one of the major reasons Trump launched his trade war has yet to be resolved, and while getting a “phase one“ deal sounds well and good, it’s not at all clear that President Art of the Deal will be able to advance to beyond that (though he’ll assuredly claim as much in an quickly debunked tweet some time soon.)

The Art of the Deal

President Trump says has not agreed to roll back tariffs on China

By Alexandra Alper and Andrea Shalal

WASHINGTON -- President Donald Trump on Friday said he has not agreed to rollbacks of U.S. tariffs sought by China, sparking fresh doubts about when the world’s two largest economies may end a 16-month trade war that has slowed global growth.
Officials from both countries on Thursday had said China and the United States have agreed to roll back tariffs on each others’ goods in a “phase one” trade deal. 

But the idea of tariff rollbacks met with stiff opposition within the Trump administration, Reuters reported later on Thursday.
Those divisions were on full display on Friday, when President Trump -- who has repeatedly described himself as “Tariff Man” -- told reporters at the White House that he had not agreed to reduce tariffs already put in place.
“China would like to get somewhat of a rollback, not a complete rollback, ‘cause they know I won’t do it,” President Trump said. 

“I haven’t agreed to anything.”
He said China wanted to make a deal more than he did, adding that the U.S. tariffs were generating billions of dollars for U.S. coffers. 

“I’m very happy right now. We’re taking in billions of dollars,” he said.
U.S. stocks dipped after President Trump’s comments, and the dollar fell against the yen.
Trump also said the trade deal with China, if completed, would be signed in the United States. “Assuming we’d get it... it could be Iowa or farm country or some place like that. It will be in our country,” he said.
The farm state of Iowa has been hammered by the tariff war, and has hosted Chinese dictator Xi Jinping in the past.
Experts inside and outside the U.S. government warn the “phase one” trade pact could still fall apart. U.S. officials said a lot of work remained to be done when President Trump announced the outlines of an interim deal last month, and Beijing has since pushed back on U.S. demands for big agricultural purchases, among other issues.
President Trump has used tariffs on billions of dollars of Chinese goods as his primary weapon in the protracted trade war. 

The prospect of lifting them, even in phases, has drawn fierce opposition from advisers in and outside of the White House who remain wary of giving up a key aspect of U.S. leverage.
China in May scuttled a previous trade deal that U.S. officials said was 90% completed.
If an interim deal is finished and signed, it is widely expected to include a U.S. pledge to scrap tariffs scheduled for Dec. 15 on about $156 billion worth of Chinese imports, including cell phones, laptop computers and toys.
But China was also seeking cancellation of other U.S. tariffs put in place since January 2018. 

Chinese Commerce Ministry spokesman Gao Feng on Thursday said both countries must simultaneously cancel some tariffs on each other’s goods to reach the phase one pact.

Criminal Company

Killing Huawei is more important than trade deal with China
By JUN MAI 

Former Trump strategist Steve Bannon said he talks to senior officials in the White House every day about wicked China.

Driving Huawei out of the United States and Europe is “10 times more important” than a trade deal with China, according to former White House chief strategist Steve Bannon.
He also said he would dedicate all his time to shutting Chinese companies out of U.S. capital markets.
The remark by Mr Bannon, a strong advocate of an all-encompassing war against China, came days after U.S. President Donald Trump signed an executive order effectively banning Huawei from the U.S. market and cutting off its vital components supply.
“Huawei is a massive national security issue to the West,” Mr Bannon said, in a phone interview on Saturday with the South China Morning Post. 

“The executive order is 10 times more important than walking away from the trade deal. Huawei is a major national security threat, not just to the US but to the rest of the world. We are going to shut it down.”
The U.S. ban on Huawei came as a shock to capital markets and the tech industry.
Jude Blanchette of the Crumpton Group, a business advisory and geopolitical risk firm based in the U.S., said that while there was “a broad consensus” in Washington on the security concerns over Huawei equipment, the president’s executive order had surprised the market.
“We’re entering uncharted territory where actions to defend against security risks cut at complex global supply chains,” Blanchette said.
But Mr Bannon is adamant that Huawei needs to be driven out of Western markets altogether, suggesting Trump made “a mistake” in lifting a similar sanction last July on ZTE — another Chinese telecommunications equipment maker.
The U.S. had imposed the ZTE ban on the grounds that it had broken the American sanctions on Iran. But, at Trump’s urging, the restrictions on ZTE were lifted after the Chinese company agreed to a number of terms and conditions for its future operations.
“During the trade talks’ early stage, Trump gave a waiver for ZTE, which was a mistake,” Mr Bannon said.
Mr Bannon, who was fired by Trump in August 2017, is also calling for shutting Chinese companies out of American capital markets.
“The next move we make is to cut off all the IPOs, unwind all the pension funds and insurance companies in the U.S. that provide capital to the Chinese Communist Party,” he said.
“We’ll see a big move on Wall Street to restrict access to capital markets to Chinese companies until [they agree to] this fundamental reform.”

In March this year Mr Bannon revived the cold war Committee on the Present Danger specifically to target China.

The CPD was first established in the early 1950s as a bulwark against the influence of communism in the U.S. 

The group disbanded after some leading members were drafted into the Dwight Eisenhower administration, but was reformed in 1976 by U.S. patriots to counter the Soviet Union during the cold war.
Without providing further details, Mr Bannon said he “talks to senior officials in the White House every day about China.” 

When asked if he meets Trump regularly, the right-wing populist said, “No, if I need to talk to him, I go through his lawyers.”
But he cited reports by The New York Times and POLITICO in the past couple of months which said Trump “liked Steve a lot."
“It is pretty well known I was the one who worked closest with President Trump,” Mr Bannon said. 

“I’m much farther to the right than President Trump on this [China]. And I pride myself with that. [I’m] the super hawk.”
Mr Bannon said the objective of what he called “an economic war” with China was to force Beijing to carry out fundamental reforms.
“I don’t think it’s going to be resolved quickly. This is the beginning of a very long and tough process,” he said.
“I have dedicated my life to this. This is what I do 24 hours a day. The pressure we are going to keep up will be relentless. We are not going to be quiet.”

The Art of the Deal

President Trump says he is in no rush to complete China trade deal

By Steve Holland, Jeff Mason

WASHINGTON -- U.S. President Donald Trump said on Wednesday he was in no rush to complete a trade pact with China and insisted that any deal include protection for intellectual property, a major sticking point between the two sides during months of negotiations.
Trump and Chinese dictator Xi Jinping had been expected to hold a summit at the president’s Mar-a-Lago property in Florida later this month, but no date has been set for a meeting and no in-person talks between their trade teams have been held in more than two weeks.
Bloomberg reported on Thursday that a meeting between the two was more likely to take place in April at the earliest.
A person familiar with the matter told Reuters that there “were rumblings” in Washington about a possible meeting in late April.
The president, speaking to reporters at the White House, said he thought there was a "good chance" a deal would be made, in part because China wanted one after suffering from U.S. tariffs on its goods.
But he acknowledged Xi may be wary of coming to a summit without an agreement in hand after seeing President Trump end a separate summit in Vietnam with North Korean leader Kim Jong Un without a peace deal.
“I think Xi saw that I’m somebody that believes in walking when the deal is not done, and you know there’s always a chance it could happen and he probably wouldn’t want that,” Trump said.
China has not made any public comment confirming Xi is considering going to meet Trump in Florida or elsewhere.
The president, who likes to emphasize his own deal-making abilities, said an agreement to end a months-long trade war could be finished ahead of a presidential meeting or completed in-person with his counterpart.
“We could do it either way. We could have the deal completed and come and sign, or we could get the deal almost completed and negotiate some of the final points. I would prefer that,” he said.
President Trump decided last month not to increase tariffs on Chinese goods at the beginning of March, giving a nod to the success of negotiations so far.
But hurdles remain, and intellectual property is one of them. 

Washington accuses Beijing of forcing U.S. companies to share their intellectual property and transfer their technology to local partners in order to do business in China. 

Asked on Wednesday if intellectual property had to be included in a trade deal, Trump said: “Yes it does.”
He indicated that from his perspective, a meeting with Xi was still likely.
“I think things are going along very well -- we’ll just see what the date is,” Trump told reporters at the White House.
“I’m in no rush. I want the deal to be right... I am not in a rush whatsoever. It’s got to be the right deal. It’s got to be a good deal for us and if it’s not, we’re not going to make that deal.”

‘MAINTAINING CONTACT’
China’s Foreign Ministry said on Tuesday that Xi had previously told Trump that he is willing to “maintain contacts” with the U.S. president.
China industrial output growth falls to 17-yr low, more support steps expected
Over the weekend, Vice Commerce Minister Wang Shouwen, who has been deeply involved in the trade talks with the United States, did not answer questions from reporters on whether Xi would go to Mar-a-Lago.
Two Beijing-based diplomatic sources, familiar with the situation, told Reuters that Xi would not be going to Mar-a-Lago, at least in the near term.
One said there had been no formal approach from the United States to China about such a trip, while the second said the problem was that China had realized a trade agreement was not going to be as easy to reach as they had initially thought.
“This is media hype,” said the first source, of reports Xi and Trump could meet this month in Florida.
Though Trump said he is not in a hurry, a trade deal this spring would give him a win to cite as an economic accomplishment as he advances his 2020 re-election campaign. 

The trade war has hurt the global economy and hung over stock markets, which would likely benefit from an end to the tensions.
In addition to smoothing over sticking points on content, the United States is eager to include a strong enforcement mechanism in a deal to ensure that Beijing can be held accountable if it breaks any of its terms.
U.S. Trade Representative Robert Lighthizer, who has spearheaded the talks from the American side, said on Tuesday that U.S. officials hoped they were in the final weeks of their talks with China but that major issues remained to be resolved.

We are at war against the Chinese, and it's not just over trade

• CNBC's Jim Cramer does not expect a trade deal between the U.S. and China any time soon.
• President Trump and Chinese dictator Xi plan to meet around the G-20 summit later this month.

By Matthew J. Belvedere

President Donald Trump speaks during a press conference with Xi Jinping at the Great Hall of the People in Beijing on November 9, 2017.

CNBC's Jim Cramer said on Monday he does not expect a trade deal between the United States and China any time soon.
"I think we are at war against the Chinese, and it's not over. And the war is not just trade," Cramer said on "Squawk on the Street," taking cues from the speech that White House trade advisor Peter Navarro delivered last week.
Dr. Navarro said Friday any agreement between Washington and Beijing to end their trade dispute, which resulted in back-and-forth tariffs, will be on "President Donald J. Trump's terms, not Wall Street terms."
Cramer said the tone of Navarro's speech on economics reminded him of the kind of rhetoric that then-President Ronald Reagan used decades ago during the Cold War with Russia over nuclear arms.
"That's a speech that Reagan gave against the Soviet Union. And that didn't end well for the Soviet Union," said Cramer, the host of "Mad Money." 

"The G-20 is going to be so important."
Cramer was referencing the summit of the Group of 20 leaders in Buenos Aires, Argentina, at the end of the month when President Trump and Chinese dictator Xi Jinping plan to meet.
In September, the White House imposed its latest round of tariffs, totaling $200 billion of Chinese products. 

In response, China levied tariffs on $60 billion of U.S. goods.
President Trump has also threatened additional tariffs of $267 billion, which would basically cover the rest of all Chinese imports into the U.S.

The Trudeau government overlooks China’s dangerous duplicities just to land a trade deal

Broad public ignorance of Chinese truths is an important means to achieving Ottawa’s desired ends.
By Shuvaloy Majumdar

Most of what Canadians read and hear about modern China occupies a narrow space between calculated dishonesty and aggressive deception.
A Chinese economy still overwhelmingly run through politicized structures is portrayed as a hub of free enterprise. 

A state ruled by a despotic clique is sold as a forward-thinking global leader. 

A regime bent on deploying technology to control its populace and wage cyber warfare abroad, is featured as a bastion of technological marvels. 

A country that holds little genuine affinity for Canada, beyond what will serve its own interests, is presented as a loyal, unambiguous friend.
That China is a different nation today than it was 40, 30, or even 10 years ago is undeniable. 

But the unqualified praise for the lessons Beijing belatedly learned since the 1980s must not be used to conceal how China remains captive to a deeply regressive governing ideology — a mixture of Communism, chauvinism, mercantilism, and colonialism.
Indeed, in many ways the defining story of the last few years has been the steady eclipse of Beijing’s much-vaunted agenda of “reform” by a resurgent and unapologetic pursuit of geopolitical self-interest explicitly at odds with that of its supposed Western partners.
The rise of Xi Jinping, an ultra-establishment hardliner, has been particularly revealing. 

His short reign has already made clear that the People’s Republic will be animated by solidified one-party rule, entrenchment of a neo-Communist command economy, and consolidation of a vast empire of interests abroad. 

Persistently troubling trends show no sign of slowing, including the increasing “weaponization” of Chinese commerce to elicit geopolitical submission, rigid alliances with rogue states, self-serving distortions of international law, and an aggressive defence of the so-called “Chinese model” of development unburdened by “foreign” notions of democracy and human rights.
With China’s industrialization, forays into globalization and technological innovation, the country’s economic interests have never been more globally engaged, and today they correlate directly to its more formidable military and strategic ambitions. 

China is no longer willing to hide its strength and bide its time, as the architect of its state capitalist model Deng Xiaoping had recommended long ago. 

Instead, Xi is shifting China’s posture from strategic patience toward seizing the strategic advantage — by rapidly developing China’s digital, economic, political and military arteries around the world, with Beijing as the heart of a rising and reinvigorated Middle Kingdom.
The Trudeau government is not the first in Canadian history to view China’s strength and size with reckless excitement, but it is certainly the first to channel this enthusiasm into a policy goal as substantive as free trade. 

Free trade with China, which Ottawa pursues with a dogged determination they’ve been unable to muster for much else, is marketed as a panacea to alleviate virtually everything that ails modern Canada, from sluggish economic growth to traditional insecurities of “American dependence.”
In the pursuit of these dreams, much will be sacrificed. 

Whatever other criticisms one can offer, the government’s project cannot be dismissed as naive. 

The men and women staffing the senior levels of government fully grasp the realities of the Chinese regime and its motives. 

They pursue their project not from ignorance but in spite of this knowledge.
It is clear, however, that broad public ignorance of Chinese truths is an important means to achieving Ottawa’s desired ends. 

Only then can the tough questions be dodged and appropriate skepticism dismissed. 

Global Affairs Canada, partisan journalists, and taxpayer-funded think tanks thus produce a relentless deluge of spin, half-truths, and happy talk about our Chinese friends, while condemning even the mildest voices of concern as paranoid, “red baiting,” or even racist. 

The result is an intellectual atmosphere in which honest dialogue is chilled, constrained, and stagnant.
An honest guide is needed to the unflattering truths of a country whose reputation Canada’s present leaders insist on shielding as they tighten bilateral ties. 

China is a nation whose guiding spirit is not the thoughtful pragmatism of a promising superpower, but the calculated cynicism of an insecure state. 

Collectively, we should be reminded to see China as it actually is, and not as some may wish it to be.

World's Stupidest President

Trump's New China Deal May Increase U.S. Trade Deficit
By Gordon G. Chang

Thursday, the U.S. Commerce Department announced the U.S. had reached a trade deal with Beijing. “The first real breakthrough that we’ve had with China in decades” is how Commerce Secretary Wilbur Ross described the agreement to Neil Cavuto of Fox Business on Friday.
The new pact could be a “breakthrough,” but it may not constitute progress, at least from the U.S. perspective. 

On the contrary, it might actually increase America’s bulging trade deficit with China.
Last year, that deficit in both goods and services was, according to the Commerce Department, $309.8 billion.
Technically, the new agreement incorporates the “initial results” of the Trump administration’s “100-day action plan” on trade. 

The concept of the plan was announced at the conclusion of the meeting between the American and Chinese presidents at the beginning of last month at Mar-a-Lago.
Under the 10-point plan announced Thursday, Beijing agreed to allow U.S. beef into the country by July 16, the 100th day of the 100-day plan.
Beijing promised to expeditiously process eight U.S. biotechnology product applications.
Foreign businesses from July 16 will be allowed to provide credit ratings, and Beijing will process licenses for credit investigations.
Beijing agreed, by July 16, to issue rules to allow U.S.-owned credit card companies “to begin the licensing process.” 

The agreement calls for Beijing by July 16 to issue to two qualified U.S. financial institutions licenses for bond underwriting and settlement.
Unfortunately, a number of Beijing’s promises in the 10-point plan are essentially pledges not to do something that it should not have been doing in the first place. 

Take the much-publicized agreement on U.S. beef. 

China in 2003 imposed a ban on all U.S. beef because of an isolated case in Washington state of bovine spongiform encephalopathy—mad cow—disease, and, without justification, effectively kept the prohibition in place.
Similarly, China’s credit card promise is essentially a pledge not to continually violate its World Trade Organization obligations. 

Beijing lost a 2012 case on the subject.
What did Ross get that will really benefit the U.S.? 

The beef promise is important, and so may be the promise on credit ratings and investigations. 

With the general tightening of liquidity by the Chinese central bank, creditworthiness has become a pressing issue.
The other promises, however, look like chaff. 

The credit card opening should in theory benefit Visa and MasterCard, but no one thinks either of these giants will make substantial inroads against China’s UnionPay, which by now has grabbed an almost complete monopoly.
With bond defaults beginning to ripple throughout China, it’s not the right time for any institution to underwrite such obligations except perhaps those for the largest state issuers, where the margins are already razor-thin and the business is already locked-up. 

It’s unlikely that any foreign business will make money in Chinese bond underwriting this decade.
It’s not clear, at least at this point, what expedited consideration of biotech applications will mean.
Ross says the deal will increase access to the Chinese market for American liquefied natural gas, but that is not true. 

Perhaps he is talking about undocumented side agreements, but the 10-point plan includes no LNG promise by Beijing. 

On the other side of the ledger, China clearly gained much. 

Washington by July 16 agreed to issue a proposed rule to allow imports of Chinese cooked poultry. Moreover, the Trump administration opened up the U.S. bank market to Chinese institutions, promising to consider their applications on the same basis as others.
In these areas, Chinese players have competitive advantages. 

Therefore, don’t be surprised when Americans begin eating chicken from the world’s No. 1 source of avian flu and start getting cheap credit cards—and cheap credit—from Chinese banks.
It is telling that, on these two important promises of access for Chinese poultry and Chinese banks, Beijing did not agree to reciprocal promises of access for American competitors in China.
“This will help us to bring down the deficit for sure,” Secretary Ross told the media, talking about the 10-point plan. 

“You watch, and you’ll see.”
We will watch because there is nothing “for sure” about trade deficit reduction. 

Ross told Cavuto that things are different this time, that “there’s a new relationship pattern being struck between China and ourselves.” 

“We’re developing personal relationships and personal relationships in Asia in general and in China in particular are of the utmost importance,” he told the Fox Business anchor. 

They’re more important than contracts, Ross assured us.
I hope he’s right about the power of personal relationships because his plan does not address what is fundamentally wrong with the U.S.-China trade relationship. 

Fox News Channel’s Jenna Lee on Friday asked Secretary Ross the most pertinent question, whether the announced plan was a “temporary fix” or a “structural change.”
Ross in response suggested the plan addresses the big issues, and then he told her the administration’s vision is to have agreements with a “one-year time horizon” and then “longer-term deals.” 

There are hundreds of matters to work on, perhaps more than 500, he said to the Washington Post and others.
Washington, D.C.-based trade expert Alan Tonelson is not impressed with the administration’s general approach of tackling the trade deficit issue-by-issue. 

“History clearly teaches that meaningfully opening the markets of determined mercantilist countries like China is virtually impossible using conventional trade diplomacy,” he told me on Saturday. 

“Their governments have created economy-wide systems of protection, and they operate these systems through powerful, secretive bureaucracies that curb imports with informal decisions that are difficult for outsiders even to identify, much less litigate against.” 

These counties can accede to foreign demands and remove certain barriers from time to time, Tonelson notes, “but they remain fully capable of replacing them with others.”
He’s right. 

China over the last decade has been progressively closing off its market, and this trend is now proceeding faster than ever under current supremo Xi Jinping.
No one expected Ross in 34 days to overcome China’s intractable trade posture, but he’s the one who raised expectations with his optimistic assessments Thursday and Friday. 

Now, everyone will be watching monthly trade deficit numbers, as he invited us to do.
Beijing certainly will be watching. 

Chinese official media call the 10-point deal an “early harvest,” and they are right. 

It looks like an early harvest for China.