Is it Possible to Negotiate Fair Trade Practices With China?

I applaud the aggressive approach that the Trump Administration is taking on trade with China and it is difficult to argue that the effort is not only fair but long overdue. China has notoriously flouted long standing trade agreements by engaging in unfair trade practices. Most egregious among them is the stealing of intellectual property from foreign companies, and the least of which is the raising of trade barriers and the manipulation of its currency, the yuan, to protect its domestic industries and boost its trade exports.

The debate over whether the USA or China stands to lose the most in a trade war is really beside the point. The USA is still the stronger, more diverse economy, and the envy of the world because of its transparency, rule of law, depth and liquidity of its capital markets, and the fact that it still possesses the world’s reserve currency, a major advantage for conducting world trade. So, clearly the USA has many more tools at its disposal to wage a trade war than does China. However, the real question is which country is likely to succeed in getting its way as the trade war becomes more protracted and entrenched, which appears to be the case currently. In that regard, it would appear China has the upper hand. The USA must balance the long term benefits of achieving fairer trade, with the short term fallout and criticism from opposing political factions, the media and its citizenry. China is better positioned to present a unified resolve, even if it means sacrificing the welfare of, and suppressing the will of, its citizens to do so. China has the luxury of taking its time, completely unfettered by challenges posed by periodic elections and from opposing political factions.

With the recent abolishment of term limits, Chinese president Xi Jinping is defacto China’s leader for life, which confirms his status as the most powerful Chinese leader since Chairman Mao Zedong. President Trump is midway through a four-year term, and Congress, now controlled by his party, faces a midterm election this fall that could jeopardize that majority; these are political realities he must balance with his desire to negotiate a satisfactory trade agreement for America.

President Xi has the luxury of presiding over a state-controlled and censored media, in sharp contrast to our President that must contend with a biased mainstream media that ridicules him, undermines his strategies, and voices a consistent lack of respect for him and his office.

The real advantage for China is its ability to negotiate freely without regard for the welfare of its own citizens, compared with America where government is responsible to its citizens and must answer for its actions at every turn. As blunt as that statement appears, few developed nations in the world would argue that individual liberties are respected in China. That ability to sacrifice the needs of its citizens could give China the advantage in a trade war of attrition and could mean the difference between success and failure in those trade negotiations.

Knowing these facts, if you were President Xi, would you give an inch in these negotiations, or would you sit back and wait to see if President Trump loses either house of congress in the upcoming November elections, thereby further advantaging China in those negotiations? Regardless of the outcome in November, if you were President Xi, wouldn’t you wait to see if Trump is re-elected in 2020, knowing that if he loses the election it is likely that his successor will not have the fortitude and courage of conviction to continue to wage a Trade War? After all after decades of jawboning about the need to negotiate with China, heretofore there has been no real attempt by America’s politicians to remedy that injustice. All good negotiators like to let the negotiations come to them and in the meantime, President Xi can bide his time and watch America’s divisive and ineffectual political leaders win the battle for him.