How Trump's hatred of international cooperation weakened the China deal
It needed an international institution to be an arbitrator. It didn't get one.
The ink on President Trump's new trade deal with China is still drying, but worries are already growing about whether it can survive.
"Phase 1" of the agreement, which Trump signed Wednesday, only partially addresses the two sides' beefs with one another: It reduces some tariffs, commits China to purchase more American exports over two years, and includes some provisions to deal with intellectual property and other issues. But a large portion of the tariffs thrown up by both the U.S. and China, as well as American grievances with Chinese trade practices, remain unresolved.
Moreover, it's not obvious to a lot of observers how the commitments that are spelled out in Phase 1 are even going to be enforced. And this missing piece reveals a much larger point about the Trump administration — namely, its deep hostility towards international cooperation.
As Alex Pascal wrote in The Atlantic in 2019, the United States largely built the world of international institutions — the United Nations, the World Bank, the International Monetary Fund, the World Trade Organization, and more — that Trump is rebelling against. This approach is generally called "multilateralism," meaning deals that involve a whole bunch of countries at the same time. It's been enthusiastically embraced by much of the U.S. establishment in the last few decades, including President Obama and his administration. But Trump and his team prefer "unilateralism" or "bilateralism" — America going it alone, or making piecemeal deals with one other country at a time.
Of course, multilateralism inherently requires every country to voluntary restrain itself and give up some sovereignty to that network of international institutions, who make decisions that bind all the member countries. "The United States had to follow the same rules as everyone else, even though it was the most powerful country," as Pascal put it. Champions of multilateralism argue binding enhances trust, and thus cooperation, which led to "an unprecedented era of relative global peace and prosperity."
Trump and his White House don't agree with this calculus, needless to say. "Multilateralism regulates hubris," as former-President Obama once observed. And Trump certainly doesn't seem like a leader who appreciates having his hubris regulated. Less flippantly, the people who make up Trump's team are bound together by a vague agreement that multilateralism and its attendant constraints have not served American interests well.
This gets us back to enforcement in the new trade deal with China. Enforcement of a deal, pretty much by definition, requires all parties to bind themselves to certain rules, and to submit to judgments imposed upon them. If one party is accused of violating the agreement — if, say, the U.S feels China isn't living up to its obligation to buy enough American exports — it's unlikely that both sides will agree there's a violation occurring. Thus there must be some process for adjudicating the dispute, and some final authority identified by the deal who can render a judgment the parties agree to submit themselves to. The new trade deal with China is unusual in that it lacks this piece.
Instead, trade deal outlines a convoluted process by which, if one country has a complaint, they submit it to the other party. And if the other party doesn't agree the complaint is valid, there's a mechanism for sending the complaint higher up the chain of command. But ultimately, it's up to each countries' internal authorities to decide if the complaint has merit. If the country that issues the complaint can't get the other country to agree the complaint is valid, then the deal says the complaining country can start imposing tariffs. Of course, you'd expect the other side to retaliate with tariffs too, since they never thought the complaint was valid anyway. At that point, the deal is officially scrapped and the trade war is back on.
"The big story is that there is no neutral adjudication mechanism as part of this dispute procedure," Simon Lester wrote at the International Economic Law and Policy Blog. "I've never seen anything quite like this before." In other words, the China trade deal is much more similar to a casual relationship than a marriage: it's as ephemeral as both sides' moment-to-moment enthusiasm for it.
"As a result, I'm not sure how enforceable this deal is," Lester continued.
This refusal to accept binding constraints or neutral adjudication has been a feature of the Trump administration's approach: They've treated major international bodies like the United Nations, the North Atlantic Treaty Organization, and the World Trade Organization with open contempt, and in a few instances threatened to deny funding or even to demur from agreements to provide allies with defense if they're attacked. The White House also ditched the Paris climate agreement, pulled out of the Trans-Pacific Partnership, and withdrew the U.S. from the nuclear deal with Iran.
The new U.S.-Mexico-Canada Agreement (i.e. the revised NAFTA) that Trump is about to sign stands out as an interesting exception. In that case, the primary problem was that labor in Mexico was cheaper — due to lower pay and poor labor protections — which led to companies absconding from the U.S. to our southern neighbor. The goal was to bring Mexico's standards more in line with America's and Canada's. This caused a sticking point, as Mexico balked at the idea of allowing outside inspectors to check on its progress — exactly the same sort of prickliness about sovereignty the Trump administration evinces. But in that case, the enforcement was all aimed one way (at Mexico) with little need for equivalent enforcement against America or Canada. Which likely explains why Trump is happy to sign that deal.
The broader question is whether the Trump administration's assessment of multilateralism is correct. Pascal makes a good case that it's not: In particular, a multilateral coalition would probably have had much more luck convincing China to seriously reform its trade practices. And preserving the international cooperation of the Iran deal would almost certainly have worked much better to restrain that country's nuclear program.
Arguably, the real problem with multilateralism lies elsewhere: Not in whether its a better process for getting things done, but getting things done for whom? Countries are not monoliths. They contain all sorts of groups with different interests — in particular owners versus workers. As Pascal admits in passing, the binding rules of the multilateral status quo have worked out very well for wealthy owners and investors across the world, but they have not worked out so well for the working classes, particularly in the West.
This really called for a different kind of multilateralism, focused on different goals and priorities, rather than the end of multilateralism entirely. But establishment elites were as interested as Trump in treating the choice before us as simply multilateralism-as-it-exists or no multilateralism at all. And that was the mistake that gave Trump his opening to start tearing down the system.