By William Mauldin
An initial trade framework between the U.S. and China shows that
President Donald Trump is willing to put aside his tough rhetoric
and accept a limited deal with Beijing in a bid for more
substantial agreements down the road.
The pact, announced Thursday, is aimed at allowing U.S. beef
exports to China, opening up credit-card payment systems there and
potentially selling American liquefied natural gas to the
energy-hungry country. It avoids the more divisive trade issues in
the steel and aluminum industries.
Still, the agreement is significant in that it shows how the
Trump administration is ready to emphasize cooperation and open
markets, as opposed to imposing the across-the board tariffs Mr.
Trump talked about in his campaign.
While parts of the deal are the result of long-running talks
originating in the Obama administration, officials characterized it
as a down payment on potentially greater economic accomplishments
with Beijing in the coming year.
"Both sides also identified other issues that will require
significant effort to resolve and achieve progress on, still within
the 100-day period," Commerce Secretary Wilbur Ross said, referring
to a plan Mr. Trump agreed to in April with Chinese President Xi
Jinping for achieving, within 100 days, a set of economic openings
between the two countries.
Mr. Trump's softer tone toward China in recent weeks is seen
partly as an effort to gain cooperation over North Korea, but also
part of an effort to give economic negotiations a chance to bear
fruit, current and former officials say.
The kinds of tariffs Mr. Trump pledged in 2016 on the more than
$400 billion in goods China sends the U.S. annually would likely
have buoyed some American manufacturers. But the tariffs --
essentially a tax on goods crossing the border -- would have raised
the prices consumers pay for everything from cellphones to
clothing, and diminished commerce between the two countries, with
the possible result of a trade war.
Since he became president, Mr. Trump has avoided threats of
broad tariffs, which his aides have described as a strategy to win
concessions from China and other countries.
The U.S.-China deal this week addresses a series of trade
irritants, ranging from clearing a backlog in China's slow approval
of American genetically modified seeds to giving Beijing a deadline
for resuming beef imports from the U.S. Still, the preliminary
10-point bilateral trade plan, released by both governments
Thursday, didn't address larger issues for the industries involved;
for example, the plan doesn't include concrete changes to boost
natural-gas trade.
The agreement the Trump administration worked out with Beijing,
part of what the administration hopes will be a bigger pattern of
opening Chinese markets, appears to be just an understanding
between the two governments.
One country could fail to honor the plan, or a political shift
could undermine it -- with no spelled-out repercussions. "None of
these are enforceable in the same sense as a WTO type of case,"
said Chad Bown, a trade expert at the Peterson Institute for
International Economics, which backs trade liberalization.
Still, Mr. Trump can now market the progress with China as an
economic win and a welcome distraction from political headwinds
back home. Hours after it was announced, Mr. Trump touted the
agreement Friday on Twitter as "REAL news," distinct from the
domestic political firestorm that captured public attention in
recent days.
Mr. Ross described the agreement as a "herculean"
accomplishment. "This is more than has been done in the whole
history of U.S.-China relations on trade," he told reporters.
The shift toward potential cooperation with Beijing -- and away
from confrontation -- isn't lost on some of Mr. Trump's hawkish
trade advisers during the campaign.
"The best time to judge this administration's China policy is
going to be a year or two from now to see what has actually
happened," said Peter Navarro, now head of the new White House
Office of Trade and Manufacturing Policy, in a recent interview.
"In the meantime, calling a prideful China out publicly during
these early negotiations would be counterproductive. No one
understands that better than the president."
Mr. Ross portrayed the talks with China as an effort to win a
series of quick concessions after previous administrations achieved
little tangible progress in long-running talks on a more
comprehensive bilateral investment treaty.
At the same time, the administration has launched wide-ranging
investigations into steel and aluminum that could be used -- with a
final decision from Mr. Trump -- to pressure Beijing over its
exports of low-price steel and aluminum, which American producers
blame for hollowing out U.S. metal production.
The focus on opening up individual markets drew cautious support
from business groups and U.S. lawmakers, who expressed hope that
the Trump administration will work to achieve broader economic
gains. "The real work lies ahead," the U.S. Chamber of Commerce
said in a statement.
"Most of this is about additional talks," said Sen. Ron Wyden,
the top Democrat in the Senate committee that oversees trade. "At
this point we need a lot more detail to really answer," he said in
an interview, emphasizing that the newly confirmed U.S. trade
representative, Robert Lighthizer, should be a big part of future
negotiations.
Some labor groups and Democrats have complained that Mr. Trump
is weakening his stance against Beijing by apparently backing out
of a threat to name China a currency manipulator and not
prioritizing talks on reducing the country's steel overcapacity, at
least not publicly.
American steel producers have successfully petitioned for import
tariffs on certain Chinese steel and aluminum products, and many
hope the broad investigations based on national security that the
administration launched in recent weeks will result in more
tariffs.
But for now Messrs. Trump, Ross and other officials appear to be
focused on working with Chinese counterparts to open markets long
blocked by sanitary concerns, bureaucratic red tape or outright
protectionism.
"This move from China is a step in the right direction, but it's
just symbolic," said Ker Gibbs, chairman of the American Chamber of
Commerce in Shanghai. He said foreign players would continue having
a hard time gaining traction in China.
The deal is symbolic for China as well, allowing it to depict
Mr. Xi's team as skillful at negotiating with a new American
administration that has pledged to take China to task over its
trade practices.
The announcement comes as Mr. Xi gets ready to showcase his
flagship trade project -- the One Belt, One Road plan to build
roads, pipelines and ports across a vast swath of the globe -- to
leaders of around 30 countries in Beijing. The project has come to
symbolize China's message that it is committed to open trade.
One big political risk Mr. Trump faces with the latest
negotiations is that they're unlikely to have a big impact on the
$347 billion trade deficit between the two countries.
U.S. beef exports to China, if resumed in July as planned, may
only account for a few billion dollars in coming years, and the
U.S. at the same time has agreed to accept cooked chicken from
China, which could weigh a bit on the U.S. deficit. Liquefied gas
exports depend on expensive infrastructure and complicated
government approvals.
"This is small," said Mr. Bown of the Peterson Institute. "If
Trump is going to continue to use the bilateral trade deficit with
his kind of test, this is not going to dent it in any significant
way."
The overall U.S. trade deficit is based on American patterns of
savings and investment. Restricting imports with a given nation, as
Mr. Trump repeatedly threatened during the campaign, could merely
shift the deficit with one country to another country, and trade
agreements tend to boost both imports and exports with a given
bloc, economists say.
Sending American natural gas to China, if it takes off, could
raise the price of energy for U.S. manufacturers and hurt their
competitiveness, Mr. Bown said.
Mr. Wyden also worries that China's overcapacity in steel and
aluminum could gain further support from access to American gas. He
says he appreciates any opening for beef exports to China from his
state of Oregon.
--Chuin-Wei Yap contributed to this article.
Write to William Mauldin at william.mauldin@wsj.com
(END) Dow Jones Newswires
May 12, 2017 18:53 ET (22:53 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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