A stunning debate unfolded in the Oval Office between President Trump and his top trade negotiator last Friday in front of the cameras and a visiting Chinese trade delegation. The president argued that memorandums of understanding (MOUs) with China are essentially meaningless, while U.S. Trade Representative Robert E. Lighthizer vowed to change the name of the document under negotiation to a “trade agreement” and promised it was enforceable.
In fact, though, it doesn’t matter what you call it: Whatever the United States and China sign is meaningful only if Beijing decides to actually do what the document says. And China’s history with such agreements provides overwhelming evidence that it can’t be trusted to uphold any pledge to address the real structural issues in the U.S.-China economic relationship, such as fair competition, intellectual property protection, forced technology transfer and state-directed economic espionage.
The Trump-Lighthizer public dispute, besides being an embarrassment, tells us the president is souring on those inside his team who are driving a hard line toward Beijing. All the signs are that he’s getting ready to strike a weak bargain that includes some trade benefits while setting aside larger national security concerns.
“They are headed on the path of making a suboptimal deal,” one administration official told me. “It’s all about the president being able to say he got a deal. He never cared as much as some thought about the structural stuff.”
The MOU or “trade agreement” being prepared for Trump and Chinese President Xi Jinping to sign at an upcoming Mar-a-Lago summit will surely include Chinese promises to address their large-scale predatory and unfair economic practices, officials say, but there’s internal skepticism that any of it will be truly enforceable.
“They will have some stuff around the edges, things that you could point to as change, if you don’t know what’s really going on,” the official said.
Inside the administration, there’s a growing sense Trump wants the U.S.-China trade dispute to be over, so that he can claim a win, ride the market rise and campaign as the leader who got results for farmers and others who may get a temporary export bump. That desire is pushing Trump to side with China-friendly officials like Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow, who prioritize trade and market concessions over economic security and national security concerns.
The internal fight goes on, but hawks lament signs such as the president’s recent tweet seemingly defending Huawei from being frozen out of the United States. An expected executive order on that has been held up for unclear reasons.
To predict Beijing’s adherence to any deal, one need only look at the long list of U.S.-China agreements on issues like intellectual property and economic espionage that Beijing has ignored or violated over the years. In 1989, China committed to the United States in an MOU to submit a copyright bill in the National People’s Congress, which became law in China the following year.
But in 1991, recognizing that China had broken its promises, the United States designated China a “priority foreign country” for inadequate protection of intellectual property — one that is deemed harmful to U.S. commerce. This forced China to sign an MOU with the United States on intellectual property in 1992.
But China didn’t adhere to that either, so another MOU was signed in 1995, and an action plan to implement that MOU was signed in 1996. Having failed to significantly improve its practices, China was added in 2005 to the “priority watch list,” where it remains.
The most recent major broken promise was struck with the Obama administration in 2015, when China pledged not to use espionage for economic purposes. Experts said that because the Chinese Communist Party has mixed economic and political espionage so fluidly, there’s no prospect of Beijing ever keeping that promise.
“In many cases, they simply blatantly violate what they promised, and rather than us sanctioning them, we raise a ruckus and create a new deal, and the Chinese say, ‘We really mean it this time,’” said Michael Wessel, a commissioner on the U.S.-China Economic and Security Review Commission. “It’s like Lucy and Charlie Brown and the football.”
There are some conceivable measures the United States could add to a trade agreement with China that could make it somewhat enforceable, such as automatic penalties for noncompliance, he said. But if past is prologue, the Trump administration will leave dispute resolution to the future, a practice that typically allows Beijing to get away with violations because future confrontation always carries political and economic risks.
Xi knows that Trump needs the U.S.-China trade deal not to smell bad politically in the short term, Wessel said. But Beijing can simply wait under after the U.S. election and then do whatever it wants.
“They just have to get to November 2020, and then they can go back to broadly violating their commitments and our rights,” he said. “We’re in the best position relative to China we have ever been in. If we give up now or let them off the hook, it’s going to be hard to get another chance to do this.”
So, what’s to be done? Just give up on negotiations and hunker down for a never-ending trade war? Not exactly. There’s still time for Trump’s people to persuade him to make any deal with Xi as tough and enforceable as possible, based on real metrics and real penalties. Congress can help by pushing for tight enforcement of existing laws that protect the U.S. economy from China’s unfair economic aggression.
Ultimately, we are seeing the divergence between Trump’s political interests and the national security interests of the United States in combating China’s economic aggression. If Trump strikes a bad deal with Xi, he will become just the latest U.S. president to claim he got the better of Beijing, when in fact the opposite will be true.