Updated: Jun 13
An agreement negotiated between Washington and Beijing during the Trump Administration calling for increased imports of American goods by China expired last week. The deal was penned at the time to provide some tariff relief for Chinese exporters to the U.S. in exchange for giving a boost for American exporters to China, a quid pro quo of sorts.
However, in the end, the agreement fell short of its expectations as China did not meet the import goals for many products. Although there were substantial gains made in agricultural exports, which was an essential objective of the Trump Administration.
Regardless of the performance of the agreement, with its expiration, we're left to ponder what's next? Indeed, the question poses a quandary for the Biden Administration. For sure, relations between both countries have been rocky, and the great question for 2022 is will relations improve or not? Unfortunately, the jury is still out on that one.
Important Countries, Big Problems
The relationship is complicated and multifaceted, deeply affected by great power rivalry, and tainted by both countries' fundamental political and economic forces. It's overly simplistic to simply blame China for not living up to an agreement. Chinese authorities explain that economic factors have affected the country's ability to purchase many of the products outlined in the trade deal.
At the same time, it's also equally simplistic to blame strained trade relations on the Trump Administration. Indeed, the Biden Administration has had the opportunity to reverse the trade policies of its predecessor. But it has not done so. Political and economic factors weigh heavily on any decision made by Biden. Options range from renegotiating the agreement to reimposing tariffs slashed as part of the original agreement or beginning a new path.
When pondering international relations, it's always prudent to expect the unexpected, as there are always so many factors in flux — political, economic, and otherwise. As the Trump Administration learned, it's not a simple matter to muscle China into compliance. Blunt instruments don't work. Moreover, America's ability to muscle other countries to succumb to its objectives has yielded mixed results. Think Afghanistan.
Where China Stands
But in China's case, the country can push back and resist demands it considers unfair or unreasonable. Concurrently, many internal factors affect Chinese attitudes toward the rest of the world. Indeed, these internal pressures appear to manifest themselves in government policies that play up nationalism and anti-American fervor. More pointed, such tactics simply deflect public opinion in China away from many of its own problems.
For instance, China faces a ticking demographic time bomb at its basest level, as an aging population will result in a declining population. A more immediate example is a significant debt crisis. In addition, recent scares in China's real estate markets underscores the problem. More so, how much money is Beijing prepared to print to prop up industries that have clearly grown beyond their means? And then, of course, there are problems of environmental degradation caused by rapid industrialization and human rights violations alleged in the Xinjiang province against the local ethnic Uyghur population.
Challenges for the U.S.
This brings us back to the United States. Although still the dominant power globally today, its power relative to other countries has declined as other countries, led by China, have caught up. It's not the unipolar world the U.S. enjoyed in the 1990s anymore.
Concurrently, America has its own set of problems. Its political system is tattered; decades of political and cultural infighting have undermined the great democracy. And then there's the economy. The American model of capitalism lost its luster after the financial crash of 2007. But today, with trillions of dollars injected into the economy to withstand the worst of the global pandemic, how much money is the government prepared to print? As a result, higher inflation may be with us for some time to come.
With this as a backdrop, relations between the two great powers of the 21st century unfolds. Trade is an essential measure of the relationship's health and its implications for the world. Unfortunately, and is often the case, the humble garment trade is caught up in the middle, a pawn of sorts in the jostling of position for the great powers.
The Humble Garment Trade
Stuck in the middle of all of this is our industry. So what will be the implications of continued trade tensions be for textiles and apparel? Chinese manufacturers have been the linchpin to successful sourcing for nearly 40 years for so many brands. These days, however, brands increasingly see vulnerabilities in placing all or most of their sourcing with China.
How about all those American retailers who've suffered through attacks on Chinese social media over the Xinjiang issue? Talk about being between a rock and a hard place! But, of course, so many American companies desire access to the Chinese consumer market, but at what cost? Again, this goes well beyond sourcing and merchant activities.
It's time for a rethink. But, as a starter, our industry must grapple with problems it would prefer to obscure or sidestep. After all, there's money to be made. For sure, most brands would like trade issues to be solved transparently, easily solvable, and manageable. But, above all else, companies in our industry crave predictability, something the world has not had much of over the last couple of years. Thank you, pandemic.
Offering A Way Out?
But trade can be managed if only the authorities find the means and can offer solutions. Unfortunately, it's difficult not to be skeptical these days. To read the headlines in the papers each day is like previewing the next Hollywood disaster movie, whether it's streamed or not. Are we really staring at Armageddon?
I hope not; hype has a way of permeating daily life. The same goes for international relations. It's always easy to succumb to hyperbole and claptrap. What's needed now is clear-headed policy and meaningful interaction between Washington and Beijing.
After all, we have businesses to run that employ millions of people worldwide. A New Year's resolution? Sure, fix trade relations between the United States and China.
This article was originally published on January 24, 2022 in sourcingjournal.com.