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China fell far short of promises it made to purchase American goods

09/02/2022    23

New data show that China effectively bought none of the additional $200 billion in goods it promised to as part of a 2020 trade deal.

China fell far short of the commitments it made in a 2020 trade deal with the United States, failing to purchase the promised volume of American airplanes, soybeans, energy, services and other products before the end of last year, data released Tuesday morning showed.

In a trade agreement signed with former President Donald J. Trump in January 2020, Chinese leaders committed to buying an additional $200 billion worth of American goods and services over 2017 levels by the end of 2021, in addition to other trade commitments. Those targets were viewed as ambitious at the time and would have amounted to a record level of purchases by China.

In order to reach those targets, China would have needed to purchase at least $227.9 billion of U.S. exports in 2020 and $274.5 billion in 2021, for a total of $502.4 billion over the two years, said Chad Bown, a senior fellow at the Peterson Institute for International Economics.

But China did not come close, Mr. Bown said in an analysis of the trade data published Tuesday, buying only $288.8 billion, or 57 percent, of the American exports it promised.

That volume was actually below the 2017 levels that had served as a baseline for the agreement, Mr. Bown said. In other words, China bought none of the additional $200 billion of exports that it pledged to purchase, he said.

“The data released today confirms that China has fallen well short of the purchase commitments they made under the Phase One agreement,” Adam Hodge, assistant United States Trade Representative for media and public affairs, said in a statement. “We have engaged the PRC on its shortfalls for months, but have not seen real signs towards making good on the purchase commitments and our patience is wearing thin.”

The Biden administration has been carrying out negotiations with Chinese officials about the trade deal and said that it intends to hold China to its commitments. But it has not yet clarified what action it will take in response.

The trade agreement did include an enforcement mechanism, in case one side failed to follow through on meeting its commitments. In that scenario, the trade deal calls for both governments to carry out talks; if those talks are unsuccessful, tariffs can be imposed.

But many American companies have complained that tariffs on Chinese products are already high. And in conversations with the Biden administration, Chinese leaders have cited a clause in the trade deal that calls for consultations between the governments “in the event that a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations.”

Mr. Trump, who imposed stiff tariffs on Chinese goods in an attempt to force a trade deal, had said the purchases would lower the U.S. trade deficit with China. Mr. Trump viewed the gap between what America imports and what it exports as evidence of economic weakness, and he promised that his trade deal would generate an export boom, particularly in farm country, heading into the 2020 election.

But trade data released Tuesday morning show that those results never materialized.

U.S. goods exports to China did grow substantially in 2021 from the previous year, rising 21.4 percent to $151.1 billion in 2021, including a record volume of agricultural goods. But American demand for imports from China also surged, and the U.S. deficit with China widened 14.5 percent from the previous year to reach $355.3 billion.

While purchases of products like soybeans, medical supplies and semiconductors were strong, sales of autos and airplanes were weak, and service exports, like tourism and education, were badly hurt by the pandemic, Mr. Bown’s tracking shows.

China made more progress on other commitments in the trade deal, like removing technical barriers to American agriculture, strengthening protections for intellectual property and opening its financial sector.

And officials in both governments have pointed to the unusual circumstances of the pandemic as a reason for the shortfall, including factory stoppages, shipping disruptions and swings in consumer demand.

But “signing something that was problematic, if not unrealistic, from the start, shows some degree of bad faith on both sides,” Mr. Bown said.

Scott Paul, the president of the Alliance for American Manufacturing, which represents manufacturers and workers, said that commodity purchases were never the solution to fixing a lopsided U.S.-China trade relationship, and that until more fundamental issues in that relationship were addressed — like Chinese subsidies, intellectual property theft and lax labor and environmental laws — the massive trade gap would remain.

“The results of the much-hyped Phase 1 trade deal with China are officially in — and, my, are they disappointing,” he said.

Unlike Mr. Trump, Mr. Biden has made no concrete promises to lower the trade deficit. But he has pledged to spur a revival in American manufacturing and reduce the country’s dependence on China.

To accomplish this, the Biden administration has thrown its weight behind a massive legislative package that would pour nearly $300 billion into research and development and manufacturing, including major investments in the chips sector, in addition to an infrastructure bill that has already been signed into law.

Mr. Hodge added that the trade deal Mr. Trump signed in 2020 “did not address the core problems” with China’s state-led economy, and that the United States would continue its “efforts to shape the environment around China.”

That included “building resilience and competitiveness at home, diversifying markets, limiting the impact of Beijing’s harmful practices, working with allies and partners, and using the full range of tools we have to defend American economic interests,” he said.

Source: The New York Times

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