US-China: Trump, Trade and the Law of the Jungle

On Wednesday, Donald Trump announced, with great fanfare, a “preliminary” trade agreement with China. True to form, he gave himself a big pat on the back. Standing alongside Chinese Vice Premier Liu He at the White House, he declared that a “historic” step had been taken.

Historic?

Perhaps, but not for the reasons stated by the American president. Donald Trump himself claims that the agreement with China is intended as a first step toward “fair and reciprocal trade.” First, that is far from certain. Second, it is not for this reason that it is so significant.

Rather, it is because the agreement marks a major step back in terms of international trade: The law of the jungle has prevailed.

The agreement between Washington and Beijing represents “a breach of the rules-based multilateral system,” as Sébastien Jean, director of the Centre for Prospective Studies and International Information, explained yesterday in the newspaper Le Monde.

In fact, according to several experts, the agreement demonstrates that power relations between states are in the process of overriding the rules governing international trade.

For the American president, as we have seen on many occasions, might is always right.

For a medium-sized power like Canada, this is very bad news.

The agreement between Washington and Beijing favors the United States in such a way that it affects third parties’ access to the Chinese market. Furthermore, it is likely to have an impact on Canadian exports to China.

Under the agreement, China has promised to buy an additional $200 million worth of American products in the space of two years. In order to achieve this, Beijing may have to reduce the imports coming from its other trading partners, Canada among them.

This contempt for the rules governing international trade is also made evident by the Trump administration’s love of tariffs. And also by the way in which it takes malicious delight in throwing a wrench in the works of the World Trade Organization. Let us not forget that since last December, the organization’s appeals court has been paralyzed because Washington is blocking the nomination of new judges.

It is not for nothing that Justin Trudeau’s government has repeatedly said throughout its first term that we must combat, at all costs, the “weakening” of the “rules-based international order.” We must remember that this was an absolute mantra for Chrystia Freeland, the then-minister of foreign affairs.

The problem is that attempting to reinforce this system with Trump at the helm of the world’s leading power is a bit like trying to put out the fires of hell with a glass of water.

The worst part is that the trade war between the United States and China is not over. Far from it.

The structural problem within trade relations between the two countries has not been resolved. For example, no one has talked about Beijing’s subsidies for state-owned businesses. Nor has the subject of cybersecurity been broached. And even if great strides have been made in terms of intellectual property, there is still a long way to go.

Furthermore, the tariffs imposed by the American administration on a substantial portion of around $370 million worth of Chinese products have not been lifted. Instead, future negotiations have been announced for a second phase of the agreement, which will be necessary to put an end to the dispute.

Still, the White House has made gains. Without question. And this preliminary agreement is well timed for a president whose impeachment trial has just begun.

Add to that the fact the U.S. Congress yesterday ratified the new version of the North American Free Trade Agreement, and it is clear that Trump is being offered new ammunition with which to convince Americans that he is doing a good job in terms of the economy and that he deserves to be reelected.