Collapse of the threat of ‘phase one’ trade deal

If both sides are committed to signing a trade pact, they will have to push back hardcore mentors among themselves

The elongated trade war between China and the US continues to haemorrhage the two largest economies of the world and subsequently ushering a slump to the global economy, which is expected to report a growth rate of 3% in 2019.

Despite the narrowing trade deficit with China, US trade deficit widened by $24.8 billion or 5.8% for the nine-month period of 2019. Services surplus — the linchpin of US foreign trade —decreased $20 billion or 10.1% on the back of increased services imports for January-September.

China’s customs also showed that the country’s global trade contracted by 2.5% for January-October. Although exports were roughly flat at minus 0.2%, the imports fell sharply by 5.1% year on year, to about $1.7 trillion in the first 10 months of 2019.

Since weakened, Chinese imports ended up in over $92 billion of fewer Chinese imports of goods and services from the world. The decline would drive the global economy to further plunge and increase job losses to the countries exporting goods and services to China.

The flagging Chinese imports epitomised that Beijing has cut its reliance on imported goods and relayed harms to its trading partners. On the other hand, China’s 10-month trade surplus which soared to $340.3 billion since 2018 showed that its economy remained relatively immune to sustaining significant losses.

Beijing is aware of its falling imports and is therefore actively promoting its innovative China International Import Expo 2019 (CIIE 2019) to increase its imports and give an impetus to global trade and economic growth.

Hassled by the China-US trade war and impelled by the vast Chinese market, nearly 200 American companies showcased their products and services at the CIIE’s second edition. American participants were increasingly disinclined to endorse the US obsession of intervening in China’s Hong Kong affairs and slating the Chinese economic model. They were largely of the view that the US should not impose its ideology on China.

The businessmen’s sentiments need to be realised, and China and the US should step up efforts to wrap up the “phase one” trade deal. Favourably for world manufacturers and the global economy, hopes about a potential China-US deal have been piling up every day. However, the rolling back of tariffs would be crucial for a long-lasting and durable trade deal.

Last Thursday, Chinese commerce ministry spokesperson Gao Feng urged both sides to simultaneously cancel the tariffs, terming it an important condition for reaching an agreement. The White House was also “very, very optimistic” about a deal to end the 16-month trade war. Nonetheless, Trump’s Friday remarks of “he hasn’t agreed on anything [tariffs roll back]” could slay the talks.

While China has wielded relentless efforts to open its market to foreign companies and pledged to increase US imports, it would be extremely inequitable if the Trump administration doesn’t agree to roll back tariffs, the root of the China-US trade feud.

As tariffs have been the sticking point between China and the US, the promising environment would restore business and investors’ confidence and stabilise the global economy. Yet the hawkish elements are in quest of an opportunity to disrupt the trade deal by exploiting this issue.

Pragmatically, the spirit of the “phase one” trade deal was to annul tariffs imposed by either side. Having met all US pre-conditions and showing its intent to lift tariffs on American goods, China was inevitably likely to ask the US to roll back tariffs.

But the truculent Trump’s aides and opponents are coming up with a fierce reproach against China for renegotiating the maiden trade handshake. If both sides are sincerely committed to signing a trade pact, they will have to push back hardcore mentors among themselves, otherwise the hopes to elevate the global and bilateral economies and secure millions of manufacturing jobs would fade briskly.

Published in The Express Tribune, November 14^th, 2019.

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