China's Phase One Purchase Commitments Unrealistic, Analysis Says
Not only are the purchase requirements in the new China trade deal unrealistic, other developments in China's economy and the trading relationship make them even further out of reach, according to an analysis by economist Chad Bown, a senior fellow at the Peterson Institute for International Economics. Bown notes that the rate of growth needed to meet the targets is higher than when China's economy was growing at 10 percent a year, and China's economy is growing more slowly now. Additionally, the tariffs on Chinese goods that remain in place after phase one are a further drag on the economy.
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Retaliatory tariffs on American agriculture led Chinese buyers to establish new importing relationships, and he said private companies may not wish to switch back. Moreover, even if U.S. soybean farmers decide to expand planting expecting higher exports to China, African swine fever -- and the elimination of 40 percent of the country's pigs -- reduces demand for soybeans, which are used as animal feed.
Also, the U.S. is intensifying its export control regime, “limiting sales of many technology and telecommunications products for which there is considerable demand in China. China cannot increase imports of products that the United States refuses to export.”
Even if China shifts purchases from European cars to American ones, and from Japanese machine tools to American ones, there could be fallout for other American exporters, he writes. Of the total U.S. exports to China in 2017, $51.6 billion worth -- 28 percent of total -- are left off the targets for increased exports. Bown suggests that China may reduce purchases of those goods as it tries to ramp up purchases of the tracked commodities and manufactured goods.
Bown said an escalation in the trade war due to purchases falling short is far off -- the U.S. trade statistics for 2020 won't be available until March 2021. Still, he said, “Unrealistic export targets may imperil not only trade peace but also the trade progress required to tackle the legitimate concerns in the US-China trade relationship.”