Major reforms needed for next US-China trade deal

Washington Post: The Trump administration and China appear to be in the final stages of negotiations on what could be a major trade agreement between the two countries. High-level talks move back to Washington on Wednesday, with a tentative deal foreseeable soon thereafter, to be followed by a wrap-up visit to the United States by President Xi Jinping. It’s not too soon to start defining the minimum conditions of an acceptable deal from the U.S. point of view.

“Structural” is the key concept here, as President Trump has acknowledged. We had our doubts about Mr. Trump’s imposition of tariffs on hundreds of billions of dollars’ worth of Chinese imports, in part because it provoked China’s own tariffs on U.S. goods and in part because the president’s invocation of “national security” as a legal rationale threatened to undermine the reciprocity-based trading system more broadly. Aggressive as they were, his tactics could be redeemed if they force China to change not only such transitory factors as how many soybeans it buys from the United States, but also more deeply embedded trade-distorting practices such as systematic subsidies for state-owned exporters and forced technology transfers imposed on U.S. and other foreign investors.

CAUSE FOR CONCERN

On this point, there is cause for concern in recent indications that the administration has all but abandoned the goal of greater digital openness in China’s economy. Any trade negotiation requires give and take. So far, Mr. Trump seems to be gaining some ground in areas such as agricultural and energy sales and intellectual property protection; the Chinese seem ready to concede greater latitude for U.S. companies to operate without Chinese joint venture partners. They expect to be rewarded with an end to some or all of the tariffs Mr. Trump imposed.

Yet China may not be bargaining from a position of as much strength, economically, as it would have had a few years ago. Growth is slowing, and debt is rising — creating an opportunity for the Trump administration to achieve goals that have eluded previous administrations.

On Sunday, Mr Trump threatened to further raise tariffs Friday if no deal is reached. Undoubtedly, the American people, and the world, will cheer any deal that removes the threat of a trade war, if only because it removes a source of uncertainty hanging over a benign economic situation. But that should not be the standard of success.