{"id":5533,"date":"2020-02-05T17:31:41","date_gmt":"2020-02-05T22:31:41","guid":{"rendered":"https:\/\/www.chinacenter.net\/?p=5533"},"modified":"2023-04-07T09:26:33","modified_gmt":"2023-04-07T13:26:33","slug":"us-china-trade-pact-president-trump-just-signed-fails-to-resolve-3-fundamental-issues","status":"publish","type":"post","link":"https:\/\/www.chinacenter.net\/2020\/china-currents\/19-1\/us-china-trade-pact-president-trump-just-signed-fails-to-resolve-3-fundamental-issues\/","title":{"rendered":"US-China Trade Pact President Trump Just Signed Fails to Resolve 3 Fundamental Issues"},"content":{"rendered":"
President Donald Trump shakes hands with Chinese Vice Premier Liu He after signing the trade agreement.
\nAP Photo\/Evan Vucci<\/span><\/span><\/figcaption><\/figure>\n

Penelope B. Prime<\/a>, Georgia State University<\/a><\/em><\/p>\n

U.S. President Donald Trump signed a trade deal<\/a> with China on Jan. 15 intended<\/a> as a first phase toward a more comprehensive agreement between the two countries.<\/p>\n

In exchange for some tariff relief, China promised to buy<\/a> an additional US$200 billion in American goods and services over the next two years and make structural reforms that would provide more protection for U.S. intellectual property. It still leaves about $360 billion in punitive tariffs on Chinese imports in place \u2013 and more sanctions would be triggered if China fails to meet the terms of the deal.<\/p>\n

Good news, right? The end of the trade war is nigh? Don\u2019t get your hopes up.<\/p>\n

While business leaders in both countries will be temporarily relieved, the underlying tensions between them will not end easily.<\/p>\n

As an economist who closely studies the U.S. relationship with China<\/a>, I believe there are fundamental issues that won\u2019t be resolved anytime soon.<\/p>\n

Doing it in phases<\/h2>\n

Tariffs and other trade issues have received most of the attention during the trade war, but the more fundamental \u2013 and difficult \u2013 challenges are with lax intellectual property protection and China\u2019s industrial policy.<\/p>\n

The U.S. is unhappy with China\u2019s use<\/a> of these tools to develop its economy and to help its companies compete \u2013 unfairly, from the U.S. perspective. And many of the Trump administration\u2019s demands challenge China\u2019s normal business and policy practices.<\/p>\n

China\u2019s leaders can\u2019t be seen by Chinese citizens as giving into the U.S., while Trump wants to show that he is tough on China as part his campaign for reelection. This makes the negotiations very sensitive on both sides.<\/p>\n

That\u2019s why American and Chinese negotiators, who have been engaged<\/a> in talks for almost two years, decided to try to get to an agreement in phases.<\/p>\n

Phase one has focused on the trade balance and tariffs, with some provisions relating to technology transfer, intellectual property and opening China\u2019s economy to foreign business. Phase two is expected to then deal more deeply with intellectual property enforcement and economic reform in China.<\/p>\n

Given the negotiations went on for so long, it\u2019s fair to ask, why are these issues so difficult to resolve? I believe there are basically three factors that have made finding much common ground difficult \u2013 and phase one won\u2019t change that.<\/p>\n

Government subsidies<\/h2>\n

First, China\u2019s successful growth has combined market competition with government-led industrial policy. For example, when China\u2019s leaders decided the economy needed more innovation, it created incentives and targets<\/a> for companies and research institutes to create patents. The number of patents filed has soared as a result.<\/p>\n

A wide range of government subsidies is used to direct and assist private as well as state investment in similar ways.<\/p>\n

The U.S. does this as well but not on the same scale, and therefore views it<\/a> as unfair.<\/p>\n

From China\u2019s perspective, however, it is not reasonable for the U.S. to require China to change its development model in exchange for removing tariffs.<\/p>\n

Protecting intellectual property<\/h2>\n

Getting China to do more to protect the intellectual property of advanced technologies is another especially thorny issue.<\/p>\n

Both countries are facing economic challenges that can be aided by improved technology. But since in many areas Chinese capabilities have caught up with those of the U.S., or are being rapidly developed, there is much more pressure<\/a> from the U.S. for China to accept global norms on intellectual property rights.<\/p>\n

Even while China\u2019s own IP protections have improved<\/a> at home, there is ample evidence that Chinese companies have copied foreign technology without permission or payment, despite China\u2019s acceptance<\/a> of IP protection as part of World Trade Organization membership.<\/p>\n

Foreign companies also report being compelled<\/a> to share advanced technology in order to do business in China. While, technically, the companies can decide to pull out of China\u2019s market, the U.S. argues that this hurts the competitiveness of U.S. businesses. It either means they must lose their technological advantage or not have access to the business opportunities that China\u2019s large market offers. There is no reciprocal requirement of Chinese companies doing business in the U.S.<\/p>\n

The phase one agreement begins to deal with the IP issues and includes a complaint process, which is a step in the right direction. It remains to be seen, however, how extensive it will be and how quickly it\u2019ll be implemented given that Chinese companies will still face intense pressure from the government to advance China\u2019s domestic capabilities.<\/p>\n

Military concerns<\/h2>\n

Finally, technology capabilities are related to growing military concerns.<\/p>\n

Many of the advanced technologies that China is racing to obtain have military as well as civilian uses. U.S. policy under the current administration has indicated a wariness<\/a> about China\u2019s military intentions and is considering options.<\/p>\n

This wariness has been bolstered<\/a> by China\u2019s military buildup, especially naval capabilities in Asia. Some advisers<\/a> to the Trump administration argue that China\u2019s ultimate long-term goal is to replace the U.S. as the dominant global power.<\/p>\n

China\u2019s rise<\/h2>\n

Conflicting differences in the U.S. and China\u2019s economic systems were less of a problem so long as Chinese companies lagged far behind their American counterparts in terms of technology and competitiveness.<\/p>\n

As China has grown more technologically advanced, its relationship with the U.S. has become increasingly strained. This will only get worse as China\u2019s economy develops and its companies compete more with the U.S. and others.<\/p>\n

The phase one agreement represents an important step in re-setting the dialogue between the two countries in a positive direction. Whether we see a phase two will depend on open discussion and trust.<\/p>\n

Good relations with the U.S. have been one of the foundations of China\u2019s successful development and entry into global markets. Chinese leaders are now weighing how much these good relations with the U.S. matter to their future.<\/p>\n

This is an updated version of an article originally published<\/a> on Dec. 13, 2019.<\/em><\/p>\n[ Deep knowledge, daily.<\/em> Sign up for The Conversation\u2019s newsletter<\/a>. ]\"The<\/p>\n

Penelope B. Prime<\/a>, Clinical Professor of International Business, Georgia State University<\/a><\/em><\/p>\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

President Donald Trump shakes hands with Chinese Vice Premier Liu He after signing the trade agreement. AP Photo\/Evan Vucci Penelope B. Prime, Georgia State University U.S. President Donald Trump signed…<\/p>\n","protected":false},"author":4,"featured_media":5534,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[928],"tags":[442],"topic":[1049,1051],"journal-year":[1068],"coauthors":[639],"acf":[],"yoast_head":"\nUS-China Trade Pact President Trump Just Signed Fails to Resolve 3 Fundamental Issues | China Research Center<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.chinacenter.net\/2020\/china_currents\/19-1\/us-china-trade-pact-president-trump-just-signed-fails-to-resolve-3-fundamental-issues\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"US-China Trade Pact President Trump Just Signed Fails to Resolve 3 Fundamental Issues | China Research Center\" \/>\n<meta property=\"og:description\" content=\"President Donald Trump shakes hands with Chinese Vice Premier Liu He after signing the trade agreement. 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