Thread by @ChadBown

In late 2019, China agreed to buy tens of billions of dollars of additional US exports in 2020 under Trump's Phase One deal.

That didn't happen. Here’s why.

My latest 1/
piie.com/blogs/trade-an…

First, the good news.

China actually bought more from the US in 2020 than in 2019, including of those "phase one" products.

China even bought relatively more from the US of those goods than it bought from the rest of the world... 2/

But both comparisons are irrelevant for the LEGAL agreement. (Read the text.)

Under the threat of continued tariff escalation, Trump convinced Beijing in December 2019 to commit to an additional $200bn on top of *2017* trade flows—not 2019.

In 2020, China fell 41% short... 3/

MANUFACTURING: Trump cast his trade policies as designed to help US manufacturing

US manufacturing exports to China had nearly doubled 2009-2017. The trade war put an end to that.

And in the first year of Phase One, manufacturing continued to suffer, declining another 5%... 4/

MANUFACTURING: Before screaming "BUT THE PANDEMIC!!!", yes of course.

But also, look at the stories of...
• Autos - Trump's trade war shifted production outside of the US, and it did not return
• Aircraft - the 737 MAX was grounded long before COVID-19 (or Phase One)... 5/

AGRICULTURE: Amazing! It got back to 2017 levels. But Ag exports...
• ended up 18% short of the 2020 legal commitment
• FAR lower than Trump's deal (see Annex 6-1 footnote b) wanted - ie, China would “strive” to buy $5bn more per year ON TOP OF the unmet commitments... 6/

AGRICULTURE: Fascinating stories under the hood for each product during the trade war and Phase One:

• African Swine Fever – bad for soybeans, good for pork
• WTO disputes: good for corn, wheat
• @SarahCpr – GREAT! but not good enough to fix the lobster problem... 7/

ENERGY: The commitments themselves were a riddle

And those exports performed the worst of the three goods sectors, reaching less than 40% of the 2020 legal commitment... 8/

What if there had been no Trade War and Phase One agreement?

Thought experiment: What if US exports in 2018, 2019, and 2020 to China had grown at the same pace as China’s imports from the world?

US exports to China would have ended up 19% higher than actual 2020 levels... 9/

What if there had been no Trade War and Phase One agreement?

• US would not have suffered massive export losses in 2018 and 2019.
• American taxpayers would also not have needed to fund tens of billions of dollars of farm subsidies... 10/

The European Union has gotten A LOT of criticism about its new investment deal with China, 'CAI.'

CAI gets the EU much of the same "good" stuff the US got in Phase One (financial services, a bit on forced tech transfer).

But WITHOUT the self-inflicted trade war suffering... 11/

The Phase One deal should not be ripped up, however. There are elements worth keeping and building upon.

But the dubious policy objective of reducing the bilateral trade deficit—the heart of Trump’s phase one deal—with purchase commitments should be scrapped.

The purchase commitments only sowed distrust in the very same like-minded countries with which the new US administration must work to tackle their mutual concerns involving China.

That is why the US needs a new China policy. ENDS/

piie.com/blogs/trade-an…

Our reaction when seeing Phase One legal text in January 2020 for the first time

Did they REALLY define the $200 billion of additional purchase commitments...

- over 2017 -- and not 2019 -- levels?
- NOT to include 27% of US exports?

(photo legit. people actually in office!)

So based on that look at the details of the Phase One legal text, and what had been happening in the trade data, my reaction was THIS in January 2020...

piie.com/blogs/trade-an…