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What The U.S.-China Trade Deal May Mean For The WTO


The new trade deal that President Trump signed yesterday with China seems promising for both the U.S. and China. The U.S. relaxes some tariffs on Chinese imports. China agrees to make some changes and buy more American products. But there could be some losers in this deal.

Here to talk about the impact of the U.S.-China agreement on other countries and the World Trade Organization is Simon Lester of the Cato Institute. Welcome to the program.

SIMON LESTER: Thanks for having me on.

CORNISH: So these are two massive economies. Will the deal lead to a big shift in China's sales from other countries to the U.S.?

LESTER: That's a great question that we're all wondering about. So China has agreed to purchase an additional $200 billion of U.S. products over two years. And some questions arise from that. What does that mean? Can the U.S. even supply that amount? Do we have that much on hand? And is China going to substitute purchases from other countries with U.S. products? And if so, how are other countries going to feel about it? And you would think the answer is they're going to be unhappy.

If suddenly they see their sales to China decrease by $200 billion over two years, they're going to be upset. But I think there's a question right now of how China plans to implement these promises. In theory, they could just buy that amount of U.S. products in addition to what they're buying from other countries.

CORNISH: But that's 50% more than it's done, right? So you have to create a whole new demand or really cut back on where - your other spending.

LESTER: Exactly. The U.S. exports to China in 2017 were about $180 - $190 billion. And so an extra hundred billion dollars every year, yeah, that's over 50% more. What are you going to do with all that stuff? Where are you going to get it? And we have no answers to that at this point.

CORNISH: Which countries could see an effect, and what recourse would they have if they had any objections?

LESTER: You know, I mean, I look around the world at Canada, the EU, Brazil, Australia, New Zealand, Japan - they all sell a lot in China. And so yeah, what would they do about it? I mean, certainly they can go to China bilaterally and, you know, make their case for, hey, we need a similar kind of arrangement. You can't discriminate against us in favor of the U.S. They could file complaints at the World Trade Organization.

CORNISH: Can we hit pause on that? Because we're hearing that the Trump administration late last year blocked new appointees to the WTO disputes court. So is there even an ability to resolve conflicts?

LESTER: That's the problem. The WTO had limited power in some of these issues anyway, and now it has even less because maybe the dispute settlement system won't even function. And there are people trying to fix it, so it's not a lost cause yet. But I think, yeah, there's limited recourse. There's a possibility of going to the WTO.

I think I'd want to see how this was actually implemented first. I don't think on the face of the deal, I see a WTO case here. But if it turns out the way China is implementing it and it's actively discriminating against other countries in favor of the U.S., then I can imagine a WTO case.

CORNISH: Now, renegotiated NAFTA, Phase 1 China deal. Is the America first approach - bilateral trade negotiations - proving successful for this administration?

LESTER: I think in terms of political victories, yes, they've got deals they can tout on the campaign trail. They've got victories they can celebrate. In terms of remaking, you know, trade, I mean, I think most people would say USMCA is different than NAFTA, but it's not a radical transformation. The fundamental framework is in place.

This U.S.-China deal, it's new. It's not well understood. It's not that deep of an agreement. So I think these are mostly cosmetic changes. You know, we're not seeing a radical transformation. But in terms of the politics of it, I don't think you need that. A new name is probably enough to - on the campaign trail.

CORNISH: Simon Lester, trade expert at the Cato Institute. Thanks so much.

LESTER: Thanks for having me. Transcript provided by NPR, Copyright NPR.