Here’s a bit of a refresher on how we got here.
Team AAM has spent the past week and a half taking it easy, enjoying the holiday break and putting to use many of the great #MadeinUSAGifts we received from family and friends. But while we were off-the-grid, the “Phase One” trade deal between the United States and China moved ahead — and President Trump is now slated to sign it on Jan. 15. He even made time to tweet about it, even with other pressing business at hand!
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!
— Donald J. Trump (@realDonaldTrump) December 31, 2019
Let’s catch up on what’s gone down — and what might happen in the weeks to come.
Why are the U.S. and China doing this again?
You must be new here. In any case, I’m happy to sum up.
For years now, the United States has [accurately] accused China of a litany of unfair trade practices, including intellectual property (IP) theft, currency manipulation, massive industrial subsidies, state-owned enterprises, forced technology transfers, and more. Essentially, U.S. workers and businesses are forced to compete against China’s communist government, which not only foots the bill for China’s various enterprises but also actively steals the trade secrets and other key IP of private sector companies.
The Washington Post explains it well:
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. …
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.
All of this has cost millions of American jobs, many of them in manufacturing.
It seems like the U.S. should do something about this!
Past presidents have tried to take on these issues with limited success. But it's a hard battle, as China is committed to its state-run economy. Under Chinese President Xi Jinping, the state spends more than 3 percent of its annual output to subsidies — roughly the same amount the United States spends on defense.
So what has Donald Trump done?
President Trump centered much of his 2016 campaign on going after China, and the Trump administration opted to take a tougher stance than its predecessors, placing tariffs on some Chinese imports in response to China’s trade cheating. That brought China to the table and, for the first time, put some real pressure on Chinese leaders to finally address these practices. But it also led to market uncertainty and hurt many U.S. farmers, who lost access to the lucrative Chinese market.
Is this the trade war they talk about on the news a lot?
Indeed, although we’d argue that U.S. factory workers and manufacturers have been in a trade war since 2001, when China entered the World Trade Organization and began flooding the global market with its goods, all priced far below market value. But we digress.
But wait — didn’t you say there’s a deal now?
Yes. The United States and China have announced a partial “Phase One” deal.
What’s in the Phase One deal?
Nobody knows for sure, since the two sides haven’t released the text! But it appears China has agreed to “increase its purchases of farm goods and other U.S. exports, and liberalize its economy somewhat.” Meanwhile, the U.S. canceled a new rounds of tariffs and cut the tariff rate in half on $120 billion worth of Chinese goods.
Here at the Alliance for American Manufacturing, we are far more concerned about what’s not in this deal — including anything to address the massive role China’s government has in its economy, which is really the heart of the problem. The Washington Post reported that “any commitments to reduce subsidies had been excised” from the Phase One agreement, for example.
AAM President Scott Paul told the Post:
“It’s incredibly disappointing the last three years has built up to this agreement, and there’s no clear path forward after this. There’s been a lot of disruption and pain, and there hasn’t been progress on the most important issues.”
So what happens now?
It looks like the Phrase One deal will be signed within the month, and Trump tweeted that he plans to go to Beijing to kickoff talks on a Phase Two. It’s completely unclear what might happen after that, especially given the upcoming presidential election — there has been some speculation that Chinese officials will hold off on dealing with the harder stuff in the hopes a friendlier face will soon occupy 1600 Pennsylvania Avenue.
But whether Trump is re-elected or faces defeat, it’s very clear that these big trade issues with China are not going away. Meanwhile, security concerns about China’s companies only continue to mount, as U.S. officials seek to ban Chinese-made drones, computers, transit and more.
There’s also growing outcry about China’s human rights abuses, particularly its placement of about 1 million people from the Xinjiang region, including Uighurs and other Muslim minorities, into prisons and concentration camps. While Beijing says the camps are “vocational training centers,” there is evidence that China is aiming to indoctrinate them to become loyal workers, using physical and psychological torture to rid these groups of their language, religion and culture. Meanwhile, nearly half a million children have been taken from their families and placed into boarding schools (usually after their parents have been put into camps).
Protests also continue in Hong Kong, where demonstrators continue to advocate for full democracy.
American trade negotiators have thus far been hesitant to bring up what’s happening in Xinjang or Hong Kong — China’s government really doesn’t want to talk about it and the U.S. wants to make a deal, after all.
But it’s becoming harder to ignore, and was even a focus of the Democratic presidential debate in December. It seems like at some point, these issues are going to come up as part of the wider trade talks — even if it is unclear when or where those talks will take place.