Negotiation and Ratification: Hurdles Remain for China Talks and the USMCA


  • Dealing With China
  • Is The USMCA On Its Way?

To obtain an economics degree at the University of Chicago, students were required to take a year-long course in the history of a non-Western civilization. Economics is a social science, after all, and business cultures can vary widely from place to place.

I elected to study Far Eastern civilization, primarily because Japan was rising as a business power when I attended college. Back then, there were suggestions that Japan would one day eclipse the United States, and I wanted to understand the secrets of its success. China, by contrast, was still seen as a backward country that, while rich in history, was poor economically. How times have changed.

One of our assigned texts during the unit on China was “The Art of War” by Sun Tzu. The book details secrets of military strategy, which occasionally involve annoying, confusing and provoking one’s opponent. I’ve been thinking about that approach quite a bit during the past year, as China and the United States work through difficulties in trade relations.

After initial rancor and a lot of confusion, trade talks between the world’s two largest economies have been proceeding productively. But while both sides are motivated to reach a deal, the final details are proving difficult to define. The situation remains the biggest risk to the economic outlook for the balance of 2019.

As we discussed recently, restrictive trade policy around the world has been a root cause of slowing global growth. China and the U.S. share the largest bilateral trade relationship in the world, one that affects a number of other countries. Economic détente between the two would be welcomed in a range of world capitals and markets.

The size of the U.S. trade deficit with China has attracted the ire of American policy makers. To be sure, trade deficits are not necessarily the result of unfair practices. They can result from natural causes, such as one country consuming at a greater rate than another. Some deficits in goods are offset by surpluses in services. Trade flows include cross-border production systems that make it difficult to identify countries of origin.

Some of these factors are at play in the U.S./China dynamic. But China’s trade policies have been a source of global consternation. When China was granted entry into the World Trade Organization in 2001, it promised to open its markets, reduce state ownership and protection of domestic firms, and safeguard intellectual property. A number of countries around the world, the U.S. chief among them, contend these promises have not been kept. The current confrontation centers on these issues.