Last week, both the White House and the U.S. Trade Representative’s Office posted the full text of the agreement, immediately after Chinese representative Liu He and President Donald Trump signed it. Upon reviewing the 96-page document, I have to admit, I was wrong. This Phase One deal, although still leaving many strategic goals unfulfilled, is a much better deal to the United States than I initially thought.
The mainstream media has been focusing on the additional amount of U.S. goods and services China has committed to purchase as the highlight of the agreement. However, they have missed the point. This agreement doesn’t start with China’s additional purchasing commitment, but with two top concerns in American businesses: intellectual property rights theft and forced technology transfer. The way this agreement is structured illustrates that, despite Trump’s rhetoric on trade imbalance, he values the ability to protect U.S. intellectual property rights and technology more than America’s additional exports.
Strong Intellectual Property Protection and Enforcement
The first chapter of the agreement is on intellectual property, and at 20 pages long, it is by far the longest chapter. It is incredibly detailed and covers a wide spectrum of topics, including trade secrets, confidential business information, pharmaceutical data, patents, piracy and counterfeiting on e-commerce platforms, manufacture and export of pirated and counterfeit goods, etc...
...This is a huge improvement from the status quo, in which Chinese government officials often demand that American businesses hand over key technological know-how when they apply for licenses to operate in China or conduct other investment activities. Chinese government officials are also known to demand that American businesses disclose information about key equipment during routine visits to business sites in China.
Huge Increase of U.S. Exports
Before the contents of the trade deal became public, the media reported only that China would increase its imports of U.S. agriculture produce to about $40-$50 billion over two years. This led many to question whether President Trump started his trade war with China and put the global economy through more than 18 months of uncertainty only for soybeans.
Now we have learned China pledges to purchase way more than soybeans. In fact, China has committed to increase imports of U.S. goods and services by no less than $200 billion over the course of two years, between Jan. 1, 2020, and Dec. 31, 2021. According to the trade agreement, the purchase increase will come from four industries: $77.7 billion worth of manufactured goods, $52.4 billion worth of energy, $32 billion in agriculture, and $37.2 billion in services. Moreover, the agreement expects such increases to “continue in calendar years 2022 through 2025.”
Keep in mind that before the U.S.-China trade war started, U.S. exports to China were only about $130 billion in 2017. Expansion of U.S. exports to China, as the trade deal mandates, is unprecedented and will be a huge boost to the U.S. economy for several years to come...
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