The EconomistSeptember 28th 2019 Finance & economics 692
P
residentDonald Trumpteased trade-
watchersonSeptember 25th when he
reannounceda deal with Japan (just weeks
afterannouncingan agreement in princi-
ple).Hepromisedit would mean “really big
dollarsforourfarmers and for our ranch-
ers”.AWhiteHouse press release boasted
abouttheextraaccess American exporters
ofbeef,porkandcheese would get to the
Japanese market. Robert Lighthizer, the
United States Trade Representative, told
journaliststhatAmerican tariff reductions
wouldarrivebyJanuary 1st. But despite all
thefanfare,thetext of the deal remained
unpublished.
Therehadbeen hopes that Mr Trump
mightsigna mini-deal with India, too, dur-
inghismeetingwith the country’s prime
minister, Narendra Modi, on September
24th.Americancompanies complain that
India’spricecontrols on heart stents and
kneeimplantsforce them to sell at below
costprice.Thehope was that, in return for a
package thatsolved that problem, India
mightbereinstated as a member of Ameri-
ca’s Generalised System of Preferences,
whichofferslower tariffs on some pro-
ducts. But negotiators failed to resolve
theirdifferencesin time.
Themismatchbetween the demand for
photo opportunities and the supply of
worked-outtradedeals explains both anti-
climaxes.Suchagreements are complex le-
galdocuments,and the language needs tobe clear enough that neither side can
squeeze out more concessions on the sly.
This is trickier when neither trusts the oth-
er. The deal with Japan was as difficult as
any other, even though the negotiators had
relatively recently sealed the Trans-Pacific
Partnership (tpp), an agreement including
America and Japan negotiated by the
Obama administration, only to be rejected
by Mr Trump.
Despite the lack of detail, one thing is
clear: the deal will be narrow. Apart from
some rules on digital trade, it seems to be
focused on tariff barriers. It omits cars and
car parts, even though these account for
around two-fifths of Japanese goods ex-
ports to America. This has drawn criticism.
Myron Brilliant of the us Chamber of Com-
merce, a lobby group, described the agree-
ment as “not enough”.
The narrow scope is partly because the
Trump administration wants to avoid hav-
ing to seek full congressional approval.
(American trade law allows small tariff
concessions to be made without it.) But it
raises questions about whether the agree-
ment complies with the rules of the World
Trade Organisation, which say deals must
include “substantially all the trade” if they
are to withstand legal challenge.
The wto does permit smaller interim
agreements—and, mirabile dictu, that is
how the Trump administration describes
this one. The leaders’ joint statement said
that within four months of the mini-deal
coming into force, the two countries hope
to finish consultations and “thereafter”
start negotiating a deal that would address
issues including barriers to trade in ser-
vices and investment.
Some are sceptical. Wendy Cutler, a for-
mer negotiator on the tpp, fears “negotiat-
ing fatigue”. Even with domestic pressure
from American producers to whom the in-
terim deal offered nothing, “it’s difficult to
see how the second stage would be con-
cluded on an expedited basis,” she says.
Further doubts stem from the leverage
that has been granted to Japanese negotia-
tors. They were brought to the table after
America walked away from the tpp by the
threat of tariffs on cars and car parts. Now
they have concessions they can roll back if
the Trump administration enacts those.
Threats have worked once. But they could
be less use in securing the big concessions
needed if this supposed staging post is not
to become the final destination. 7WASHINGTON,DC
TheTrumpadministration’s trade agenda is making slow progressA US-JapantradedealOverthe line
Camera-readycomplained that the price of entry to the
Chinese market was steeper than had been
agreed. Close and tangled relations be-
tween China’s government and private sec-
tor continued to be a problem, as cheap
loans and subsidies kept Chinese produc-
ers pumping out products even as prices
were telling producers elsewhere to stop.
The “China shock” caused by a flood of im-
ports meant that many Americans regard-
ed the competition as unfair.
As Mr Blustein explains, some of the
problems were exacerbated by American
policy choices. George W. Bush was reluc-
tant to use the defences that negotiators
had secured against Chinese imports, for
fear of hurting American consumers and
encouraging other sectors to clamour for
protection. Perhaps the threat of tariffs
would have convinced the Chinese to let
their currency appreciate more quickly.
Probably not, reckons Mr Blustein. But
America might have tried.
Other challenges were deeper, and
harder to resolve by threatening tariffs.
Rules are useful only if they can be en-
forced. China’s economic system therefore
sits awkwardly alongside international
trade law. When it is hard to distinguish be-
tween the private and public sectors, it is
hard to work out what counts as a subsidy.
When laws are enforced selectively by local
officials, gathering evidence to sue the Chi-
nese for rule-breaking is nigh-impossible.
More recent history suggests no easy
solution to this clash of economic systems.
The Trump administration’s critics lam-
basted it for pulling out of the Trans-Pacific
Partnership (tpp), a trade deal between
America and 11 countries around the Pacific
Rim, thereby abandoning the chance to
write rules that could eventually reshape
China’s domestic policies. But Mr Blustein
doubts it would have changed China’s path.
Among the bits of Chinese manufacturing
most at risk from the tppwere sectors such
as footwear and apparel. But it was already
seeking to develop beyond these.
Diplomacy had seemed to bring some
success, as when Barack Obama struck a
deal in which the Chinese agreed to stop
hacking American companies’ computer
systems and stealing their intellectual
property. (Mr Blustein reminds readers of
the double standards of America’s security
services, who fretted that Huawei, a Chi-
nese telecommunications giant, might in-
stall surveillance equipment in hardware
used around the world—even as they were
trying to do the same.) But it could do only
so much. China is a large sovereign nation
with domestic constituents to please.
Readers will probably finish this excel-
lent book feeling gloomy. Mr Blustein sees
two possible ways forward: forging a com-
mon China policy with allies; and strength-
ening the wto. Sadly, the Trump adminis-
tration is pursuing neither. 7