The U.S. and China Trade Deal

The U.S. and China Trade Deal

On May 12th, China and the United States announced a new trade deal.  China promised to allow the United States to export beef and natural gas into China. In return, the U.S. vowed to open up its market to Chinese cooked chicken as well as Chinese banks.

This is the first time since 2003 that China will allow American beef exports into the country. Furthermore, the natural gas will benefit the Chinese people who need this fuel as well as American companies who can now sell to this new market. Similarly, the U.S. secretary of commerce, Wilbur Ross, claimed that this deal supports the president’s campaign promise to decrease China’s trade surplus with the United States, although he did not mention the extent it would decrease.

Chinese banks will benefit from having access to U.S. markets, but they will have to comply with American regulations.  In the past, Chinese banks have tried to set their own economic agenda in order to avoid environmental regulations, anticorruption measures, and human rights issues.  Furthermore, Americans fear the record of loans to unstable governments, removal of local populations, and investments in unnecessary infrastructure by Chinese banks.  In the past when Chinese national banks tried to access U.S. markets, the Obama administration blocked these proposals.

Leading economists predict that there will be a boom in the natural gas industry due to high demand for the resource in China. Economists claim that the past new industries which have access to Chinese markets have experienced similar economic growth.  Despite this, there are concerns as to how Chinese banks will interact with the American markets.  It is hard to predict the outcomes of this access because the details have yet to be fully settled.

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