don’t believe trump’s hype

Pindo-China deal a new phase in global trade war
Nick Beams, WSWS, Dec 16 2019

The Trump administration is claiming a victory in its global trade war in pursuit of its “Pindostan First” agenda aimed at trying to reverse the long-term decline of Pindo economic power. Congressional approval for the Pindostan-Mexico-Canada Agreement, only possible because of crucial Demagog and trade union support amid the impeachment proceedings against Trump, and the agreement “in principle” for a “phase one” trade deal with China, have attracted the most media attention, but in the longer term the Pindo action that last week secured the wrecking of the disputes-settling procedures of the 164-member WTO is probably the most significant. Following years of objections to the WTO’s rulings as constituting “overreach” and violation of Pindo laws, which started under the Obama administration and intensified with the coming to power of Trump, Pindo refusal to back the appointment of new judges to the organisation’s appellate body caused a halt in its operations last week. The action on the WTO has not only stymied procedures for deciding on trade disputes, but may well prove to be a fatal blow to the operation of the organisation set up in 1995 to replace GATT, the General Agreement on Tariffs and Trade, established after WW2 to prevent a repeat of the disastrous trade wars of the 1930s. Lighthizer told CBS Face the Nation on Sunday:

Friday was probably the most momentous day in trade history, ever.

While Lighthizer had in mind the deal with China, his remarks have a broader significance. They came at the end of a week that saw a further disintegration of the post-WW2 multilateral trading system and the acceleration of a process in which Pindostan seeks to use its market power to dictate terms to its trade rivals. But just as its continuous wars and military interventions over the past 30 years have failed to restore Pindostan to its past position, the “victories” on the trade front may prove to be equally hollow. Even before the full details of the Pindo-China deal are released sometime next month, considerable doubts have been cast on Pindo claims it will bring an immediate boost in agricultural exports and a major increase in exports to China more broadly. Lighthizer told reporters China would work to increase its total purchases of Pindo farm products to around $40to $50b over the next two years as part of a total package to lift exports to China by some $200b. He told CBS:

We have a list that that will go: manufacturing, agriculture, services, energy … There’ll be a total for each one of those.

Trump described the deal as “phenomenal” and claimed:

Farmers are going to have to go out and buy much larger tractors because it means a lot of business, a tremendous amount of business.

These claims are belied by facts and figures. According to the WSJ:”

Pindo agricultural exports to China were just $10b in the first ten months of 2019, down from around $20b in 2017 before the trade war began. It’s unclear how this could ever get to $40b.

In a statement issued on Friday, the Pindo Farm Bureau Federation noted:

China went from the second-largest market for Pindo ag & fish to the fifth largest since the trade war began.

The response in Beijing to the trade deal stood in marked contrast to the hype emanating from Faschingstein. Ning Jizhe, vice-head of China’s National Development and Reform Commission, said:

China will increase its purchase of quality Pindo agricultural products that are competitive in the market. Specific figures will be released at a later date.

The reference to prices is significant, because China has maintained that to increase its purchases of Pindo products to the levels demanded by Faschingstein risks it being in breach of WTO rules on international trade. Joseph Glauber, former chief economist at the Pindo Dept of Ag, told the FT that details about what China had agreed to purchase remained “very obscure,” and that commitments by Beijing to increase its purchases could attract scrutiny from other countries that may question “whether Pindo products have been guaranteed preferential access” in violation of international trade rules. This is an important issue, because China is seeking to present itself as a defender of the international trading system in opposition to Pindostan and wants to ensure that Faschingstein is not able to marshal other major powers against it. Brian Kuehl, the co-executive director of Farmers for Free Trade, a lobby group opposed to tariffs, told the WSJ:

There are rightfully many doubts about the president’s claim that China will purchase $50b in agricultural products in a single year, more than twice the level of pre-trade war annual purchases.

While claiming that major concessions have been made by China, Faschingstein offered few in return. The threatened imposition of tariffs on around $156b worth of Chinese goods from Dec 15 was suspended, and the tariff of 15% on $110b worth of products imposed at the beginning of September was cut to 7.5%, but the 25% tariff imposed on $250b worth of goods remains in force, despite strenuous Chinese efforts to have it rolled back to some degree. China’s Vice Commerce Minister Wang Shouwen, a leading trade negotiator, said that Pindostan had agreed to remove the remaining tariffs “in stages.” However, he was contradicted by Lighthizer, who said there was no such agreement and any further reductions would be considered in later phases of negotiations. There are no details about when such negotiations might take place which will cover Pindo demands for Chinese action on subsidies to state-owned enterprises, and China’s plans to enhance its industrial and technological development, both of which are regarded by Pindostan as a threat to its economic and ultimately military dominance. The Pindo tariffs against China have largely remained in place, in line with Faschingstein’s insistence from the start of the conflict that some kind of enforcement mechanism had to be established to ensure China’s compliance with Pindo demands. According to Lighthizer, the two sides agreed to a system on consultations if a dispute arose. If no agreement could be reached, then it was open to either side to reimpose punitive tariff measures. One of the key concerns of Pindo businesses throughout the trade conflict is that it creates a high degree of uncertainty, which impacts on decisions regarding investment and the establishment of supply chains. That uncertainty will remain because tariffs can be escalated at any time. The “phase one” deal is already drawing opposition from anti-China hawks who feel it evades the key issue, the rise of China as an industrial and technological power that challenges the dominance of Pindostan. These views are widely held in the military and intelligence establishment. Sen Charles Schumer said:

At first Pres Trump seemed like the first president who would dare tackle this challenge, but now according to reports he has sold out for a temporary and unreliable promise from China to purchase some soybeans.

The WaPo on Sunday called the trade deal “not quite a win,” pointing to the lack of specifics on the size of China’s new purchases of Pindo agricultural commodities, describing the administration figures as “implausible” and warning of “a potentially huge dislocation to global commodity markets.” The editorial also took note of Trump’s decision to allow the WTO dispute resolution agency to cease functioning, saying:

This further confirms that Mr Trump envisions an essentially permanent trade struggle with not only China but the entire world.

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