China’s proposed trade deal is a con job designed specifically for Trump – Washington Examiner

On Friday, markets jumped in response to news of a potential deal to end the ongoing trade war between the United States and China. Naturally, investors are happy just to hear that. But China’s proposal, to boost imports of U.S. goods and cut back on America’s trade deficit with China, won’t solve any of the core issues that sparked the trade war in the first place.

Does China cheat on trade? Definitely — and unfortunately, this proposal won’t stop Beijing from doing so. It merely indulges President Trump’s obsession with the trade deficit.

But trade deficits are not an economic problem. They reflect the fact that that U.S. consumers, with more buying power than their Chinese counterparts, purchase more goods. When Chinese companies profit from that spending, they look for profitable ways to invest that money. That means that they often look to the United States with its strong economy and currency, investing in companies, real estate, and industry. That investment is a good thing for the economy.

But that doesn’t mean that there aren’t real problems with Chinese trade.

As Trump has pointed out, Chinese companies have repeatedly engaged in forced technology transfer, the practice of compelling U.S. companies to hand over intellectual property to Chinese counterparts in exchange for market access. Chinese firms have also flat-out stolen technology for U.S. and other foreign companies. In addition, China confers unfair legal advantages on its own companies with state support. They exclude foreign competitors almost entirely from certain markets, such as the Internet, and they fail to uphold intellectual property protections.

Perhaps most worryingly, China has also used interactions with foreign companies for military and state security gains. Companies that obtain foreign technology have been implicated in sharing that technology with the Chinese military and government. Huawei, for example, has recently been accused of violating international sanctions, supporting rogue states such as Iran as well as acting as a state-sponsored espionage threat as it partners with countries to roll out 5G networks.

Those are very real and serious concerns, and none of them are addressed in the current proposal.

Investors, however, seem pleased that there’s a chance to end the trade war that is costing the economy at least $1.4 billion each month. But this deal, far from being an economic cure-all, might actually exacerbate some of the real problems. Indeed, the U.S. has already moved to limit what types of goods can be exported to China for fear of their use in military operations.

Even if the U.S. goes for the current deal and ends the tariffs, Washington will still eventually have to deal with real trade issues presented by China. With this proposed deal, China is playing Trump at his own game: talking up his misguided understanding of trade deficits while pitching a “fix” that solves none of the real trade problems.