Trade War
Welcome to the second edition of Trade War, my weekly newsletter. Whether you are returning after reading the inaugural edition or here for the first time, glad to have you. I’m hoping that a summary of the week’s U.S.-China trade news is something that is helpful and hopefully not too depressing/frustrating—choose your favorite adjective of angst.
Does Trump really ‘like the idea of waiting until after the election’?
This week the on-again, off-again confusion characterizing the trade war continues. With the December 15th deadline to impose new tariffs looming, Trump threw doubts on an early resolution even suggesting a deal might not be signed until late next year: “In some ways, I like the idea of waiting until after [the November U.S. presidential] election for the China deal, but they want to make a deal now and we will see whether or not the deal is going to be right,” Trump said to reporters on December 3rd in London at the NATO summit.
Or was he (euphemism alert): ‘speaking off the cuff’…
Mixed signals, however, continued to be the order of the day. Quoting “people familiar with the talks,” (presumably people from the U.S. administration) Bloomberg News reported one day later that the U.S. and China are “moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions,” adding that Trump’s comments didn’t mean the talks were stalled, as the U.S. president was “speaking off the cuff”—one polite way to put it perhaps.
‘Sooner or later, or maybe not until the 2020 election, or not at all’
All of this provided an opportunity to gently mock trade reporters and others whose business it is to regularly call the state of play in the trade dispute. Tony Fratto, with public affairs consultancy Hamilton Place Strategies, tweeted that a China trade deal is “very, very close —and it could happen sooner or later, or maybe not until the 2020 election, or not at all,” adding that his call was based on sources who “may or may not have agreed to speak on background.”
‘Prodding China into championing a parallel, separate system’
Meanwhile another key player in China’s 2001 entry to the World Trade Organization, former USTR Representative Robert Zoellick who took over immediately after Charlene Barshefsky, weighed in with a cautionary note, while seemingly cutting the Chinese side some slack.
Speaking to the U.S.-China Business Council, a longtime booster of closer business relations between the two countries, Zoellick said on December 4th that if the U.S. becomes too confrontational, it risks “prodding China into championing a parallel, separate system, with very different rules.”
More conciliatory
Striking a more conciliatory note than Barshefsky’s recent broadside in Beijing, Zoellick made this appraisal of China’s adherence to WTO commitments: “China’s commitments in 2001 lowered its barriers considerably below those of other major developing countries, such as India and Brazil,” he pointed out, while conceding that “its record for duties that are harder to measure—such as forced technology transfer, IPR enforcement, regulatory reforms, and trade-distorting subsidies—is spotty.” (Note: “spotty” is getting the award for understatement of the week here.)
Re jobs growth, the ‘Trump Economy is CRUSHING it!’
Meanwhile, in the U.S. the monthly jobs report, as per usual, got spun as either a resounding success, or not so great, depending on who was talking. With new manufacturing jobs up 54,000 in November, Trump’s 2020 campaign manager Brad Parscale tweeted on December 6 that “The Trump Economy is CRUSHING it!”
But also: 2019 manufacturing jobs ‘weaker than 2018 by far’
Others pointed out the picture wasn’t so good if you looked a little more closely: “So a good overall jobs number for #manufacturing in November: 54k added,” tweeted Scott Paul, president of the Alliance for American Manufacturing. “That was aided by a 41.3k boost in autos & parts, most of which included @UAW workers returning to GM. Widen the lens: 2019 #manufacturing jobs weaker than 2018 by far, and slower than overall economy,” he continued.
And let’s not get into wage growth…
Then there was the issue of wage growth—not so great, pointed out Heidi Shierholz, Former Chief Economist at the U.S. Department of Labor, in another tweet: “Your monthly reminder of where we are on wages: From late 2017 through late 2018, it looked like wage growth was picking up. THAT ENDED. Wage growth has been backsliding this year.”
Players’ update
Guess who has added to his bulging portfolio of Important Things to Do, which already includes bringing peace to the Middle East? That would be Jared Kushner, Trump’s son-in-law, who is now reportedly taking a bigger role on China trade talks.
Also quoting “people familiar with the talks” Reuters reports that Kushner, “has increased his direct involvement in the negotiations with China over the past two weeks.” That no doubt means he’s been talking to Cui Tiankai, Chinese ambassador to the U.S. again (Jared and Ivanka have long worked to cultivate Cui as their back door channel on China); indeed Jared recently met with Cui, a White House official told Reuters.
Soybeans and pork
You probably already knew this, but here’s a chart to bring it home: while the trade war has not been at all kind to U.S. soybean farmers, Brazilians are benefitting big time:
Meanwhile, news out that China is waiving tariffs on U.S. pork, should be put in perspective, points out Bill Bishop, creator of the indispensable Sinocism newsletter. Because of the Asian swine flu disaster and a desire to keep pork prices down over the holidays, China is “desperate for pork right now,” and are not a concession.
Adieu WTO?
The latest body blow for the world’s top trade organization comes this week when a key role of the WTO will (at least temporarily) cease functioning.
“Trump’s efforts to hobble the global rules-based trading order will notch their most substantive win when the World Trade Organization’s appellate body will see the terms of two of its final three judges expire on Tuesday, leaving the WTO’s place as a neutral arbiter for trade disputes in tatters,” writes Bloomberg News reporter Shawn Donnan.
“On Wednesday, December 11, the Geneva-based World Trade Organization will open its doors shorn of its most important power. For the last quarter century, the group’s powerful Appellate Body lorded over the global economy” writes Todd N. Tucker in “RIP, World Trade Organization?” in The Nation.
Notable/in depth:
Who is hurt most by the China trade war, district by district? Read about it in this report from the U.S.-China Business Council.
“The New China Scare” Fareed Zakaria makes the case that the U.S. risks exaggerating the threat from China at its own peril, in Foreign Affairs.
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‘A gimlet-eyed look’
The first review of my upcoming book had me - and I suspect others - looking at our dictionaries. The Myth of Chinese Capitalism is “a gimlet-eyed look at an economic miracle that may not be so miraculous after all” writes trade publication Kirkus Review.
What’s a gimlet, you might ask? Well according to the Random House Dictionary, there are several meanings: “1. a small tool for boring holes. 2. a cocktail made with gin or vodka, sweetened lime juice and sometimes soda water. 3. (adj.) able to penetrate or bore through.” Okay, I’ll take one..