Recent U.S/China Trade Agreements and Upcoming Infrastructure Projects

On May 11, 2017, the New York Times reported that China and the United States have come to an agreement on a set of trade deals covering such areas as beef and poultry, electronic payment services, and natural gas. Some of the positions the U.S. has agreed to are said to be compromises to positions taken by the Obama administration. There remain, however, large issues to grapple with, and these may complicate relations between the two trading partners.

Some of the agreements are primarily updates to previous agreements reached under the Obama administration. For instance, for a decade, China has not accepted U.S. imports of beef due to concerns about mad cow disease. Beginning July 16th, China will allow these imports. Similarly, the U.S. has for years refused to accept Chinese imports of certain poultry products due to fears of Salmonella and bird flu, but following the recent trade agreement, the U.S. will began accepting cooked poultry imports. Other deadlines and agreements include plans to streamline the U.S.’s application to ship bioengineered seeds to China, and to allow U.S. financial institutions to offer electronic payment services in China, and for China to accept natural gas from the United States. The terms of the deals were announced on Thursday, May 11, 2017.

The Trump administration also decided to send a representative to participate in a May 14th forum in Beijing regarding President Xi Jinping’s international investment initiative called “One Belt, One Road.” Sending a top U.S. official, Matthew Pottinger, to participate signifies a step toward a more conciliatory approach following President Trump’s pre-election hardline stance toward trade relations with China.

During the May 14 forum, China’s large global infrastructure plans were discussed. China currently has projects underway in a number of countries with struggling economies and poor infrastructure, including Pakistan, Afghanistan, Kazakhstan, Uzbekistan, Kenya, and Laos. China is aggressively moving forward building roads, ports, and power plants. They are ramping up to spend as much as a trillion dollars, with the stated goal of keeping the Chinese economy going now that large domestic projects are behind them and they remain on pace to produce significantly more steel and cement than they can use in China.

There is a concern in the international community that a vast network of infrastructure projects and the debts created in participating countries will serve to tie these nations more closely to China politically as well as economically. There is a secondary concern that China will not be increasing its imports significantly.

“Tell us what we [the West] are going to get out of this,” said the past chairman of the American Chamber of Commerce in China, lawyer James Zimmerman. “It’s a nonstarter if it’s all about bringing Chinese goods to Europe, or if it’s all one way.” Matthew Pottinger, the Trump administration’s senior director for Asia at the National Security Council, said at the May 14th conference that China should provide transparency regarding the bidding for contracts, so that non-state owned companies have a fair chance to earn contracts.

United States-based companies such as General Electric and Honeywell are already talking about measures they might take to earn some of this future business. This would mean moving some manufacturing over to China; both companies said they are investigating this. Such a move is not in line with the stated goals of the Trump administration, however.