The View | How the coronavirus outbreak exposes the fallacy of the US-China phase-one trade deal

The deal is structured around targets that will be thrown into disarray by unexpected events

It tilts the playing field in China in favour of the US vis-à-vis its own allies, such as Australia and Europe, and contradicts the logic of liberal capitalism

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Chinese Vice-Premier Liu He (left) and US President Donald Trump shake hands after signing phase one of the US-China trade agreement during a ceremony at the White House in Washington on January 15. Photo: Reuters

Published: 12:00pm, 11 Feb 2020Updated: 10:26pm, 11 Feb 2020

Even when the phase-one deal between US and China was signed with much fanfare at the White House mid-January, events unfolding in central China made key terms of the deal meaningless. If there were doubts on how China could meet its additional US$200 billion purchase commitments, the coronavirus epidemic has made the improbable impossible.

As powerful as the Chinese state is, it cannot dictate consumer choices, such as which American films to watch. Now out of public health concerns, cinemas in China are deserted, if not closed.

Chinese tourists choose whether they travel to the US or Europe. Now major US airlines have stopped flying to mainland China and the US has barred the entry of non-American citizens, permanent residents and their immediate family members travelling from China.

With much reduced travel, even as aircraft orders are made on long-term projections, there is little urgency to buy Boeing jets amid global uncertainties, particularly when it is still struggling with safety problems.

In a dynamic world, it is impossible to predetermine trade outcomes. Some of the planned purchases require complex communication and human interaction, when the US government has largely stopped the flow of people between US and China. The coronavirus outbreak is a force majeure event which exposes the fallacy of the phase-one deal’s outcome-based architecture.

Even if not hampered by the epidemic, China would still struggle to deliver the targets set in the phase-one deal. Some are based on consumer choices the Chinese state cannot control, as noted earlier. Some can be realised only with time. Some are constrained by US restrictions. Yes, China can use its state power to make some – such as agriculture and energy – happen, even if it means diverting imports away from other countries.

.css-1m2rp1p{color:#34b8b5;}The View | How the coronavirus outbreak exposes the fallacy of the US-China phase-one trade deal

The View | How the coronavirus outbreak exposes the fallacy of the US-China phase-one trade deal