February 23, 2020

China Poised to Buy More From U.S., at the Expense of U.S. Allies

For now, Chinese willingness to buy American goods could cover a wide range of industries.

The published text of last week’s agreement sets clear numerical targets for large increases in American exports to China in four categories: manufactured goods, agriculture, energy and services. But officials have described an unpublished annex that specifies large increases in a long list of subcategories.

Many of the subcategories highlight products that China currently imports from Europe and East Asia, in the case of manufactured goods, or Latin America, for many agricultural goods. The trade agreement does almost nothing to change China’s rules so as to increase its total purchases of foreign goods, instead leaving it to the Chinese government to reallocate orders toward American exporters.

Over the past quarter century, China has managed its trade so that it has fairly consistently sold about $4 worth of goods to the United States for each $1 of goods that it bought. China’s trade with Europe has been more balanced, in part because Europe has often been seen as a politically safer choice in Beijing given China’s often rocky relationship with the United States.

But in the last several months, China has concluded that its huge trade imbalance with the United States has become a source of danger and instability, people familiar with the bilateral relationship said in interviews while insisting on anonymity because of political sensitivities. The imbalance has produced demands from the United States for fundamental changes in the Chinese economy, like an end to many subsidies, that are unacceptable, they said.

Beijing’s conclusion, the people said, is that the trade imbalance with the United States must be narrowed sharply this year and next. While that narrowing may hurt the interests of companies and farmers in Europe and elsewhere, those affected by it should realize that they enjoyed extra sales to China over the past two years during the trade war with the United States, they added.

Beijing has already begun ramping up its broad interagency process for managing trade to make sure that American companies receive the extra orders promised under the agreement. In speeches, Chinese officials emphasized that they want to keep commitments to buy imports, although they have publicly glossed over the extent to which the Phase 1 agreement with the United States will divert trade away from other countries.

Article source: https://www.nytimes.com/2020/01/23/business/economy/china-us-trade-deal-allies.html?emc=rss&partner=rss

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