Just a decade ago, I never could have imagined technology, agriculture, and Donald Trump would share an intersection in public discourse. Since returning from a recent visit to Taiwan, Sino-American trade and President Trump’s historic “Phase One” trade deal have been at the forefront of thinking. Traveling abroad is often the surest way to witness the disparity between free and regulated markets.
In the past few decades, Communist China has moved closer to a free-market system; however, many protectionist and centralized “command-and-control” policies remain. Lured by the opportunity of entering the world’s most populated market, American companies, investors, and previous U.S. administrations have turned a blind eye to China’s unfair trade practices. Fortunately, that is changing.
Last week, a Chinese delegation arrived in Washington, D.C. to sign the “Phase One” trade deal. This deal would greatly benefit American agriculture, financial services, and intellectual property rights. It will have a positive impact on the United States. And, speaking as an Arizonan, it will be a boon to my state as well.
[Another view: “Phase One” Is a Cave to China]
The “Phase One” deal is truly a breakthrough, particularly with respect to its powerful reformation of technology policy.
They say the first step to solving a problem is admitting there is one. For many years, American companies that wanted to access the vast Chinese consumer markets paid a price far beyond the ordinary costs of doing business: technology transfer.
In today’s economy, proprietary technology often gives companies an edge over their competition. But what’s the point if you’re funding your rival? Over the last several decades, American companies entering China had to allow access to their technology—sometimes voluntarily, and other times not.
The result was competition with Chinese manufacturers exporting knockoffs of American technology, coupled with local transportation and manufacturing costs. The common result was “new” Chinese products competing with American products, in both Chinese and global markets. Products funded by American research—sold by Chinese companies—unfairly reshaping the marketplace.
For years, China has denied such practices. Thanks to President Trump’s leadership, the “Phase One” deal openly addresses the issue of technology transfer. Under the deal, the Chinese government for the first time acknowledges the problem. While it is wise to follow former President Reagan’s maxim to “trust, but verify,” this is an important first step to restoring balance.
Further, China agreed to purchase $40-$50 billion more in U.S. agricultural products. Arizona seldom comes to mind when people think of big agriculture states, but more than 80 percent of America’s winter leafy green produce originates in Yuma. Of course, much of China’s purchases are likely to be crops like soybeans. However, expanded markets for U.S. farmers benefit all of American agriculture and this will mean good things for Arizona, too.
Until now, Chinese agriculture was imported primarily from Brazil and other South American countries, requiring farmland expansion. Introducing more American agriculture means less of this expansion—in other words, the Amazon’s destruction is impeded, thanks to President Trump.
The final groundbreaking aspect of the deal is intellectual property protection. This includes new safeguards against the piracy of music, movies, books, and software, all unlawfully duplicated. As Arizona vies to replace Silicon Valley, President Trump’s deal brings welcome relief for tech entrepreneurs.
“Phase One” is a “carrot-and-stick” deal. It promises to undo some current tariffs—the very engine that led to the deal—to ease economic pain inflicted on China. Some tariffs remain, however, pending a “Phase Two” trade deal with the world’s largest marketplace. Importantly, triggers are in place to reimpose punitive tariffs should China fail to comply with “Phase One.”
It is now clear that a “magic wand” isn’t necessary to rebuild America’s dominant, prosperous economy—it just takes a president who understands the art of the deal.