For the past two years, the United States and China have been engaged in a battle over U.S. claims that China has failed to live up to its commitments that it made when it joined the World Trade Organization in 2001. These include restrictions on foreign investment, theft of intellectual property, and subsidies and preferences given to state-owned enterprises. In the course of the dispute, the United States raised its average tariffs on $360 billion of Chinese imports from 3% to over 20% and China retaliated raising its average tariffs on $110 billion of US imports from 6% to close to 20%.
Tensions were somewhat reduced on December 13, 2019, when the two negotiating teams reached what they called a “Phase One” deal whereby China agreed to increase its purchases of U.S. farm, energy, manufactured products, and services by at least $200 billion and to strengthen its protection of intellectual property. In return, the United States agreed to cut the tariffs it had imposed in September 2019 on $120 billion of Chinese goods from 15% to 7.5% and to suspend tariffs on an additional $160 billion of Chinese goods that it had threatened to take into effect December 15. However, it left in place earlier tariffs placed on $250 billion of Chinese goods. Meanwhile, bilateral tensions continued to simmer with respect to issues involving Huawei, China's actions in Xinjiang, the South China Sea, Hong Kong, and Taiwan.
Nonetheless, on January 15, 2020, Vice Premier Liu He and President Trump signed the “Phase One” deal, declaring it to be a first step in reaching a final, more comprehensive agreement, and making clear that the two governments would continue to negotiate solutions to their outstanding differences.
The U.S. business community and allied governments gave a huge sigh of relief in what was seen as a truce, calming intense bilateral friction. But celebrations were short, as other issues took center stage.
The coronavirus, also known as COVID-19, which began in Wuhan, China mid –November 2019, spread rapidly. The first case in the United States was reported in the State of Washington on January 15, the same day that the Phase One agreement was signed.
Both governments were slow in responding to the outbreak of the new virus, blaming each other for its rapid and devasting spread. On January 30, the World Health Organization declared it a public health emergency of international concern.
According to the Johns Hopkins' April 7th COVID-19 tracking report, there are already more than 1.3 million cases worldwide, with more than 80,000 deaths. The U.S. has become the latest epicenter of the disease, with more than 385,000 cases (the highest number in the world) and more than 12,000 deaths. Dr. Fauci of the National Institute of Allergy and Infectious Diseases warned that the U.S. could experience between 100,000 and 200,000 deaths from COVID-19.
On April 5, U.S. Surgeon General Jerome Adams stated publicly: “This is going to be our Pearl Harbor moment, our 9/11 moment, only it's not going to be localized; it's going to be happening all over the country.”
The economic repercussions have been huge, and will not recede anytime soon. Already the United States has lost more jobs in March than in any month since the Great Recession, and expectations are that the April figures will be much worse. In mid-March, James Bullard, President of the Federal Reserve Bank of St. Louis, predicted that COVID-19 could cause second-quarter U.S. unemployment to reach 30%, along with a 50% drop in GDP.
On March 25, the Senate unanimously passed a $2.2 trillion emergency relief bill, seeking to limit the financial harm in the United States.
The economic shock will not be limited to the United States, however. Forecasts are out for a sharp, global recession. The United Nations estimates that the global economic losses could top $2 trillion. China's economy is expected to shrink for the first time since 1976. Indeed, Bloomberg Economics is forecasting a 20% drop in China's first-quarter GDP and only a 1.4% growth in its GDP for 2020.
The United States and China, together representing roughly 40% of the global economy, should be working together to counter this pandemic, which respects no border and is expected to continue to inflict devastating damage on economies worldwide. Too much emphasis has been focused on blaming the other for where we find ourselves today rather than finding solutions to the serious problem we confront.
Yes, China was slow to report the disease, and yes, the harm being caused by this pandemic might have been reduced if China had been more transparent about the danger and if it had not refused the assistance offered in early January by experts at the U.S. Center for Disease Control & Prevention.
But in fairness, the U.S. is not blame-free. In 2018 and 2019 the U.S. levied punitive tariffs on imports of critical medical products from China that reduced U.S. supplies and contributed to the medical shortages that our states are now experiencing. Also, after the World Health Organization declared the virus a public health emergency in January, the Administration down-played the threat for more than a month when it could have used that time to warn cities and states to prepare for an approaching crisis.
What we need now is not to look back, but to look forward and to rebuild collaborative means to confront this health emergency. The United States and China engaged in cooperative research and successfully shared data which helped combat SARS and the Avian flu in 2003, the Swine flu in 2009, and Ebola in 2014, and in doing so contributed to the building of bilateral respect and understanding.
On March 26, the members of the G-20 met by teleconference and committed to doing “whatever it takes to overcome the pandemic” and laid out a number of individual and collective actions. Now is the time for the two Presidents to work together to provide the leadership necessary to implement positive and necessary action.
On March 27, President Trump and President Xi had a cordial telephone exchange, their first in many weeks. President Xi was quoted as saying, “working together brings both sides benefits.” Hopefully, the list of simmering bilateral differences — ranging from Huawei to the Taiwan Act — will not create a roadblock to the bilateral cooperation so desperately needed today. Indeed, cooperation in dealing with this novel coronavirus could not only contribute to improving global health and economic stability but also smooth the path to greater cooperation in other areas that are eroding the bilateral relationship today.
