China trade agreement is crucial to avoiding the next Cold War

By U.S. Senator David Perdue (R-GA)
CNBC.com

President John F. Kennedy once said, “let us never negotiate out of fear. But let us never fear to negotiate.”

Kennedy’s words live on today as we fight to level the playing field with our trading partners around the world. The Trump Administration has negotiated trade deals with South Korea and Japan, in addition to the USMCA with our closest neighbors.

Earlier this month, the administration kept up the momentum by coming to a preliminary agreement with China on what President Donald Trump called “phase 1” of a potential deal.

This agreement would be a win for America. It calls for potentially doubling U.S. annual agricultural exports to China, and addresses some Chinese foreign-exchange issues. It also halted some scheduled tariff increases, making it a win for China too.

While modest, this agreement would be an important first step if it is signed by President Trump and Chinese President Xi Jinping.

It is critical that these trade talks continue and that more impactful steps are taken. If not, there is risk of the U.S. and China developing a relationship reminiscent of the Cold War.

To understand the current moment, it is important to look at the historical perspective.

As recently as 1820, China was the world’s dominant economy, until Western countries like the United States took its place. Even then, we weren’t always adversaries with them – we were even allies in World War II.

In 1978, our relationship grew closer, when China’s then-Leader Deng Xiaoping instituted capitalist reforms in his country. Since U.S. policy was to help developing nations embrace the free market, we were happy to help. In fact, President Ronald Reagan made significant investments in China.

Over the next 20 years, China experienced a surge in international trade, foreign investment and cooperation with the free world.

In my business career, I lived in Asia and saw firsthand how capital investment and economic growth transformed China for the better.

Since that time, 850 million Chinese people have lifted themselves out of poverty. Their middle class now has as many as 500 million people, compared to 150 middle-class Americans. China now ranks as the world’s second largest economy behind the United States.

However, China has used the benefits of growth to attempt to become the world’s dominant economy once more.

After being admitted to the World Trade Organization in 2001, China has failed to uphold the commitments it made to provide equal market access and promote fair competition. It has skirted WTO rules, stolen intellectual property and manipulated their currency.

All the while, the United States and other developed nations have neglected to update international trade rules or hold China accountable.

President Trump has correctly decided that this cannot continue any longer.

Now, the relationship between our two countries stands at a tipping point. We could use this opportunity to build a relationship where we compete fairly and cooperate to make the world better.

However, our relationship could also slip into a period of distrust.

If that happens, the results could be draconian. If both sides focus only on containing and surpassing each other, then the economies, businesses and citizens of the world would pay the price.

President Trump does not want this. From day one, he has asked China to stop their digital misdeeds, grant us equal market access and comply with WTO rules. If we get these, then our countries will enter a period of “coopetition” where we compete economically, but cooperate on issues of common interest.

Cooperation is the ultimate goal

Consider this. Recently, pork prices have surged in China due to an outbreak of African Swine Flu. China could solve this by purchasing American pork and other agricultural products, which would help both China and our farmers here at home at the same time.

This level of cooperation is our ultimate goal, and we can achieve it as long as we both continue to deal in good faith throughout the next phases.

Senator Steve Daines and I delivered this message personally to Chinese Vice Premier Liu He, and other lead trade negotiators, during a recent trip we took to China. Thankfully, they were receptive to our message.

The agreement that was reached on October 1st proves that incremental negotiation is the right approach. We are getting closer to rebalancing our trade relationship with China and avoiding future hostility.

There is still a long road ahead, and there is still much uncertainty. However, now is the best opportunity to move towards a period that both sides desire. We must continue working to achieve this.

If we don’t, however, then our relationship could deteriorate, and we could be headed towards another Cold War.

David Perdue is the junior U.S. Senator for Georgia.

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