About That "Underwhelming" US-China Trade Deal: Much Less Than Meets The Eye

Tyler Durden's picture

Overnight, the US Department of Treasury released the initial result of the 100-day Sino-China trade and economic negotiations, a month after the presidential summit at Mar-a-Lago in early April. Under the negotiations led by Steven Mnuchin and Secretary of Commerce Wilbur Ross in the United States and Vice Premier Wang Yang from China, the two countries reached agreements on some "early harvest" items and made progress on some key issues in agricultural trade, financial services, investment, and the energy area.

While there were no surprises in the agreement, whose terms had been leaked previously by the president himself, here are some of the key details per Citi:

  • Consensus reached to open China's market wider for US agricultural and energy products

On agricultural trade, China will allow imports of US beef on conditions consistent with international food safety and animal health standards and consistent with the 1999 Agricultural Cooperation Agreement, and will hold a meeting in May to conduct science-based evaluations of pending U.S. biotechnology product applications. Meanwhile, US promises to resolve the issue on importing cooked poultry products from China. In the energy field, US will treat China no less favorably than other non-FTA trade partners with regard to LNG export authorizations.

  • China to give wider access for US financial services industry

Out of the ten bullets, half of them focus on financial services. By 16 Jul 2017, China will allow wholly foreign-owned financial services firms in China to provide credit rating services, and begin the licensing process on credit investigation and electronic payment services. Most importantly, China will issue both bond underwriting and settlement licenses to two US banks. The US is also expected to make concessions on Chinese banks’ operations in the US.

  • Investment in US infrastructure to gain momentum and B.I.T. to continue negotiations

The US promises to attend the Belt and Road Forum this weekend, and will treat the direct investment from China the same as other countries. The collaboration on US infrastructure development is expected to be impelled by the 100 day plan.

* * *

Still, as Citi admits, in order to satisfy the US’s demand to increase exports to China and reduce the trade imbalance with China, many trade diversion practices could be enacted in the future. Given the China-US trade imbalance is structural rather than cyclical, reducing short term trade imbalances will lead to China purchasing more goods and services from the US at the expense of other economies.  

In addition, the toughest topics like dumping and government subsidiaries have not been discussed yet. Reciprocity means China would have to reduce many implicit trade barriers and beef up enforcement. This means China's services sector will have to liberalise further for foreign participation (Figure 2). And while a trade war scenario appears to have been averted - for now - we need to wait for the final result of the 100-day plan in order to have clarity as to what kind of new Sino-China trade relationship will evolve

 

While the agreement was nothing new for markets, political pundits also chimed in and according to Axios, which cites an intl trade expert, "the agreement is "underwhelming" and "mostly aspirational" — note the language: the U.S. "welcomes China," China "may proceed," the U.S. "recognizes," the U.S. "remains committed," and so on. This leaves a lot of questions as to what weight this agreement will ultimately hold."

  • For example: China will review eight pending U.S. biotech product applications that they have been on hold, but no guarantee to approve them...China will issue guidelines to allow U.S.-owned suppliers of electronic payment services to begin licensing processes. Again, this sounds like a win but the U.S. has already won a WTO trade dispute against China on these payment systems.
  • Ending China's ban on U.S. beef imports: Take this with a grain of salt. China announced in September it would end its ban on U.S. beef, but it didn't amount to anything. The Chinese have been avoiding this move for years.
  • Optics, including the U.S. recognizing "the importance of China's One Belt and One Road initiative." That's symbolically a big deal, since Xi Jinping will want to tally some wins as he nears his five-year mark.
  • finance: China will issue "underwriting and settlement licenses" to two U.S. financial institutions — which probably means a nice payday for two big banks in the U.S.

The pundits' takeaway: "It's a lot like Trump's executive orders that talk a lot but didn't do much," according to the former U.S. official.

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billwilson2's picture

More smoke and mirrors from little donnie boy.

Now americans get to eat more pre cooked chinese chicken ... lovely!!!

Rich Stoehner's picture

Good, sell all that factory farmed beef to those yellow fucks

A. Boaty's picture

A mad cow or two never hurt anybody. Oh, wait...

Anonymous_Beneficiary's picture

Yep....rather than cake...let them eat pre cooked chinese chicken!

cossack55's picture

Have a drumstick and your brain stops tickin'

Anonymous_Beneficiary's picture

Out of the ten bullets, half of them focus on financial services.

It's the new economy...or the jew economy, rather.

BigFatUglyBubble's picture

image search "growth of physicians and administrators."

mind boggling

new game's picture

china will continue to undermine our labor costs and trump really can do nothing to stop that. with the deep state corporate interests keeping him at bay, rhetoric is all we will get...

deep state in complete control of the outcome, trump is but a minion to their control.

one party tyranny. simple shit maynard.

Ghordius's picture

don't agree, new game

you see, China is a one party tyranny. and the outcome of this setup is twofold:

- the Chinese Communist Party cannot escape responsibility, there is nobody else to blame (except foreigners, of course)

- the Chinese Deep State... has to be fully aligned with the Chinese Communist Party. or... else

now, if you have two parties, and only two parties...

new game's picture

China has their own problems, 32 T for example.

How they keep that intact is their challenge, but suffice to say they will be producing cheap stuff with lower than our wages, unless usa continues to fall to 2nd world level of living and they rise.

Ghordius's picture

eh, the thing here is that trade treaties involve a lot of very fine details, and those take a huge lot of time to even discuss, let alone agree on them

further, you need experts for them, be at negotiation or in the mentioned details

evidence: the UK's first step towards Brexit was to start hiring lots of bureaucrats and experts in the Foreign Department

BigFatUglyBubble's picture

Article photoclip is great.  Trump's head looks like James Earl Jones from Conan movie.

sister tika's picture

No nation can compete with slave wages and sweat shops with little or no benefits (except other slave-wage nations). And no, that ain't Trump's fault. And who opened the China Pandora box decades ago? Not "Donnie". Nope.

BigFatUglyBubble's picture

Even one who has a monopoly on the international medium of exchange?  Or especially one who has a monopoly on the international medium of exchange. 

Now if you'll excuse me, I have go wait tables for 12 hours with no benefits.  I have taxes to pay so welfare recpients can get fat on grape drink and fried chicken.  It's almost like... I'm their slave...

 

sister tika's picture

The US trade deficit since the 1990's speaks for itself, much of which has gone directly in China's coffers. Making gadgets, widgets, Nike running shoes and cell phones at one-fourth the cost (or less) does have its advantages.

The "international medium of exchange" only served the Wall Street bankers and financial services industry. It certainly didn't help the working class plebs in America.

Ghordius's picture

it was Nixon. he woke the Dragon and Shocked us europeans

but hey, he gave you Eternal War... even though he actually said the opposite, and perhaps even wanted the opposite

and you like Eternal War. no other way to explain why you spend as much as the rest of the world for weapons

if you liked Peace, you'd have a Peace Dividend, you know? starting with 400 billion per year less taxes or more spending for other things

Oldwood's picture

Says EUROPE who damn near destroyed the world TWICE in the last hundred years. The US was forced to become the world's police and Europe has been reaping the benefits since. Yes, because of our world domination, we have become corrupt, but stop pretending your pacifism will save the world when its requisite denial is what enables aggression and tyranny.

peddling-fiction's picture

GordEUs, it was Kissinger that woke the dragon.

Kissinger's real boss is in Europe.

You are such a sneaky and slippery Europhile.

How is the cappuchino at your tower of Babel in Brussels?

GodHelpAmerica's picture

So much for bringing all those mfg jobs back. Significantly altering trade with China was the only major tenet to "make America great again". This "deal" cements the fact that Trump won an election on BS and promises that would never be fulfilled--not that this is news to the realists and cynics but with this, any remaining doubt will be removed.

Cordeezy's picture

Hopefully our companies have intellectual property protection.

www.escapeamazon.com

GodHelpAmerica's picture

Trump showed his hand in Syria and NK. Follow what they do, not what they say. The MIC continues to rule Washington. Economic hegemony will continue to be pursued through military aggression rather than real economic reforms.

roadhazard's picture

I wouldn't shake that hand either Mr. Chinaman.

fangulos's picture

For anyone had real living experience in China, pork/chicken is the real deal, beef is not their primary meat & never will be, Chinese will make those beef into dried poultry in no time and export'em else where or back to US.

Take what you can take, keep these you want and sell off those you don't want -- Sun Tszu