It’s All About The Mous: China Trade Talks Strategy Gets Clearer; U.S. Not So Much

Judging from this morning’s news out of the U.S. China trade talks I think I can see the Chinese strategy.

Step 1: Offer the United States and its President lots of money. Today the Chinese offered to buy an additional $30 billion in U.S. corn, soy beans and other agricultural products. Remember the Chinese have already proposed buying enough U.S. exports to eliminate the U.S. trade deficit with China within five years.

Step 2: Wrap everything up in MOUs–memorandums of understanding–that are light on enforcement mechanisms.

In other words the Chinese right now are willing to say just about anything to avoid having to do the really painful stuff.

Apparently U.S. and Chinese negotiators are working on multiple MOUs that would cover agriculture, non-tariff barriers (one biggie since it would include Chinese subsidies embedded in China’s industrial policy), services (China has managed to keep Visa and MasterCard out of the Chinese market) technology transfers (as a requirement in deals with Chinese partners) and protection for intellectual property.

According to press reports from unidentified sources, the idea would be to use the MOUs as a basis for a final trade deal. The tricky part in that process would be putting tracking and enforcement mechanisms into the final trade deal. Without those, the MOUs retain promises that may or may not be carried out as the Chinese government prefers.

The Standard & Poor’s 500 closed today, February 21, down 0.35%. The Dow Jones Industrial Average was lower by 0.40%. The NASDAQ Composite fell 0.39%.