Why the Deal With China Amounts to More than a Hill of Soybeans

Second, on the knottiest areas of negotiation — around Chinese theft of American companies’ technology — the deal aims to improve protections for intellectual property while not undermining China’s ability to compete in the advanced industries of the future.

In earlier language, the Trump administration almost seemed to want to remake the entire Chinese economic strategy, not merely to prevent Chinese companies from stealing from American companies. The Americans appeared to want to prohibit a state capitalism approach: state-subsidized so-called “national champion” companies in areas like aerospace, automobiles and semiconductors.

Throughout last summer, the two countries were deadlocked in part because the United States was essentially asking for things the Chinese could never agree to. In the last few months, there was more of a focus on where the Chinese had room for concessions.

The trade conflict appears to have made the Chinese more focused on developing its own technological advantages and less dependent on imports from the West. That has made them more open to changes.

“It’s ironic that the trade war, by heightening Chinese fears of being isolated from tech supply chains, has accelerated their drive to be self-sufficient,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “The means by which they accomplish tech transfer and acquisition may change as a result of today’s agreement, but their desire for it will not.”

Ultimately, with President Trump seeking re-election in 10 months and the Chinese economy showing signs of creaking, both sides had too much to lose from the open-ended escalation and were willing to do whatever they needed to stop it. That left room for the “constructive ambiguity,” as negotiators often call it, to allow both sides to proclaim victory.

“Trump never wanted to test the premise that the Dec. 15 tariffs wouldn’t actually hurt the U.S. economy, so he had strong incentive to use the definition of ‘deal’ as his ambiguity,” said Douglas Rediker, chairman of International Capital Strategies. “And China was desperate to avoid more tariffs and reduce existing ones. So getting to ‘yes’ was a common objective.”

Article source: https://www.nytimes.com/2020/01/15/upshot/china-us-trade-peace.html?emc=rss&partner=rss