On the surface, China gave the major concessions in the trade agreement with the United States that was negotiated just hours past the deadline. China has more than the U.S. to gain from good trade relations and more to lose from a trade war.
The test will be the implementation, particularly in Chinese policing of copyright and patent protection, in coming years. This will be a measure not only of Chinese good will, but of Beijing's authority over the booming southeast. Both are suspect.
The agreement was heralded when China knuckled under to a U.S. demand to close the Shenfei Laser and Optical System Co., which stamps out millions of pirated compact discs and videodiscs. Army troops raided it before dawn Sunday, allowing the negotiators in Beijing to proceed to closure. The Army is also a part owner of the firm, which enjoyed political protection.
The agreement, if enforced, means Chinese firms will stop stealing U.S. software, movies and music. Long-term beneficiaries of honesty would include American manufacturers of high tech and complex products China's exploding economy will need. First beneficiaries are movie producers who won access to China's markets, subject to political censorship. Coming behind them could be airframe, auto and computer hardware makers.
Agreement headed off U.S. tariffs of 100 percent on $1 billion of Chinese imports, matched by Chinese retaliation. That was a limited start to trade war, considering China last year sold $37 billion worth of goods to the U.S. and bought $8 billion worth in return. If that trade were to shut down, U.S. firms would lose investment opportunities to East Asian and European rivals, but loss of the U.S. market would hurt Chinese firms even more.
The stage is set for better U.S. penetration of China's markets, more honest reward of U.S. firms and individuals for creativity, a gradual righting of the trade imbalance, and China's progress toward membership of the World Trade Organization.
In the 19th century, American business was dazzled by the prospect of 400 million customers in China. The vision was never fulfilled. It is still there, still dazzling: The number of customers has tripled. The Clinton administration played tough, at least on the surface, and obtained the results it sought. For this to pay off, China must police against piracy long beyond the six-months of intense enforcement that was just agreed.
NTC