The events of the past week have crowded out reflection on economic policy. But things have been happening. Commerce Secretary Wilbur Ross described the trade deal reached with China earlier this month as “pretty much a herculean accomplishment. … This is more than has been done in the history of U.S.-China relations on trade.”
Past a certain point, exaggeration and hype become dishonesty and deception. In economic policy, as in almost everything else, the Trump administration is way past that point.
The trade deal is a “nothing burger” that a serious administration committed to helping American workers would likely not have accepted and surely would not have hyped.
On agriculture, China reiterated a promise that it has broken in the past to let in more beef. Previously, we, as reciprocity, had been withholding publication of a permissive rule on Chinese poultry, but we have now relented. Advantage China.
Nothing else we “achieved” has any meaningful nexus with U.S. jobs. China will review product applications for eight biotech products. It promises to offer increased scope for U.S. credit rating agencies, and electronic payment platforms. But it is far from clear that U.S. firms will in fact be able to compete in China — and it is clear that if they do, it will be by hiring Chinese workers in China, not American workers in America. And finally, two U.S. firms will get some enhanced ability to do bond and stock underwriting — again a benefit to shareholders and local staff rather than to U.S. employment.
What did we give up? In addition to the leverage we sacrificed by committing to issue the poultry rule, we made other meaningful concessions. First, we agreed to allow exports of liquefied natural gas from the U.S. to China. To at least a small extent that would mean higher heating costs for American consumers and higher energy costs for U.S. producers.
Second, in the context of a trade negotiation, we made concessions regarding how U.S. commodities regulators would view derivatives traded in Shanghai and how American bank regulators would treat Chinese banks doing business in the U.S. While I suspect the concessions were not major, this is reinforcing the valid concern that trade agreements may undercut the ability of regulators to protect American financial stability and more generally challenge regulatory sovereignty.
Third, we agreed to embrace — by sending high level representatives — China’s “One Belt One Road” initiative. It is almost certainly better to be in than out of this tent, but we should be getting something in return for the legitimacy we are conferring.
Now it is true that a ludicrously hyped squib of a deal is much better than a trade war. So perhaps we should be pleased that the president and his commerce secretary are so easily manipulated. Perhaps our officials know how bad a deal they got and are just hyping for political reasons.
It is an irony of our times that those who most frequently denounce “fake news” seem to most frequently purvey it.