China did not buy any of the additional 200 billion dollars in exports from the United States that it had promised in the Phase One agreement signed in the last administration of the president. donald trump.
Detailing that result in an analysis, Chad Bown, principal investigator for the Peterson Institute for International Economics (PIIE, for its acronym in English), concludes that this agreement was a “failure”.
No other researcher did a periodic analysis of the Phase One agreement like Bown and, with that authority, he was now ahead of the final results, in what had already been tilting negatively for the United States.
Two years ago, Trump signed what he called a “historic trade agreement” with China that committed the Asian country to buying an additional $200 billion of American exports by Dec. 31, 2021.
“Today, the only indisputable ‘historical’ aspect of that agreement is its failure,” said Bown, with a lapidary phrase.
Immediately, he gave a moral: “A lesson is not to make deals that cannot be fulfilled when unforeseen events inevitably occur, in this case, a pandemic and a recession. Another is not to forget the complementary policies necessary for a deal to have a chance of succeeding.”
Under the phase one dealChina has pledged to buy an additional $76.7 billion in 2020 in certain goods and services and an additional $123.3 billion in 2021 above 2017 levels.
In the end, China bought only 57% of the US exports it had committed to buy under the deal, not even enough to reach pre-trade war import levels. “Put another way, China did not buy any of the additional $200 billion in exports that the Trump deal had promised,” Bown reiterated.
Sarcastically, the researcher made a point: Trump’s Phase One deal with his “very, very good friend,” President Xi Jinping, was not a total failure. The deal stopped their trade war from spiraling.
And, according to Bown, several of its elements must be upheld, notably China’s commitments to remove technical barriers to US agricultural exports, respect intellectual property and open up its financial services sector.
However, signing off on something that was problematic, if not unrealistic, from the start, “shows some degree of bad faith on both sides.”
After two years of rising tariffs and rhetoric about economic decoupling, the deal did little to reduce the uncertainty that was discouraging the business investment needed to restart US exports.
Most of Trump’s tariffs remained in place, especially on inputs, driving up costs for US businesses. And by not negotiating the removal of China’s retaliatory tariffs, the deal may have funneled any Chinese demand for US exports from China’s private sector into its state-owned companies.
After all these considerations, Bown opined that Trump put the trade relationship between the United States and China on a new path, starting with their trade war in 2018.
“Almost four years later, the main lesson of the Phase One agreement is that different terms are still needed for the commercial relationship,” he added.
roberto.morales@eleconomista.