Digital Access

Digital Access
Access theherald-news.com and all Shaw Media Illinois content from all your digital devices and receive breaking news and updates from around the area.

Home Delivery

Home Delivery
Local news, sports, business, classified and more! News you can use every day.

Text Alerts

Text Alerts
Choose your news! Select the text alerts you want to receive: breaking news, weather, and more.

Email Newsletters

Email Newsletters
Have our latest news, sports and obituaries emailed directly to you Monday through Friday so you can keep up with what's happening in the area.
Another View

Don’t squander this trade crisis

High-level trade talks began Wednesday between Trump administration negotiators and a Chinese delegation, and it is no exaggeration to say that the near-term future of the world economy rides on the outcome.

Having already imposed a 25 percent tariff on $50 billion worth of Chinese imports, and a 10 percent tariff on an additional $200 billion, President Donald Trump is threatening to raise that to 25 percent on all $250 billion unless China agrees to a deal by March 1.

Although not devastating yet, the Trump tariffs have hurt certain U.S. and Chinese firms and industries; without a settlement, the dislocation and economic pain can only increase for both countries, and the world.

What would be a reasonable deal?

Trump has articulated two categories of grievance with China. First, he objects to structural arrangements in the Chinese economy that systematically favor domestic firms over U.S. and other international competitors: near-mandatory technology transfer through joint ventures, selective regulations, subsidized overcapacity in strategic goods such as steel and, in too many cases, outright state-sponsored theft of intellectual property. Second, there is the U.S. merchandise trade deficit with China, which reached $344 billion in 2018.

Of the two, Trump seems most exercised over the trade deficit, which he has time and again mistakenly portrayed as a “loss” for the U.S. Unfortunately, this is the less important of the two main issues. A bilateral trade surplus is neither negative or positive, per se, for a nation’s economy. In theory, the U.S. could reduce the China trade imbalance to zero – by importing all of the same products from other countries. There is also the fact that U.S. policy, specifically the huge tax-cut-swollen fiscal deficit, contributes to an overall trade deficit, of which the one with China is a part.

Trump is on much sounder footing in calling for a structural overhaul of China’s unfair system. What’s more, he deserves credit to the extent that his hardball tactics have forced China at least to discuss such issues.

China’s rulers are deeply reluctant to bargain away their internal policies, because of a mix of national sovereignty concerns and Communist Party interest-group politics. They would probably be happy if they could assuage Trump with a promise of huge new purchases of U.S. goods such as oil or soybeans. A $1 trillion, six-year offer is said to have been floated by Beijing’s negotiators. Even if the U.S. could suddenly boost production that much – which is doubtful – this would not be preferable to enforceable, irreversible change to the way China does business. Beijing seeks to turn the president’s fixation on trade deficits to its advantage. Undoubtedly a deal done on that basis would give the stock market a short-term boost, as investors expressed relief at the easing of the crisis Trump brought to a head.

Now that a crisis has arrived, however, it shouldn’t be squandered. Trump and his negotiators must not settle for less than at least a start on bona fide structural change in China.

The Washington Post

Loading more