A Temporary Truce … to Prepare for another War


On the Meaning of the “Phase One” Deal for the U.S.-China Cold War


by Michael Pröbsting, International Secretary of the Revolutionary Communist International Tendency (RCIT), 17 January 2020, www.thecommunists.net




US President Donald Trump and Chinese Vice Premier Liu Hei signed a so-called “phase one” trade agreement on 15 January. This deal shall ease the trade war between the largest imperialist Great Powers which began in early 2018.


The deal includes a commitment of China to buy an additional US$200 billion in US exports based on 2017 levels in the next two years. This shall include an additional $32 billion in agricultural goods, $52.4 billion of energy exports, $77.7 billion of manufactured goods and $37.9 billion of services.


In exchange, the Trump Administration has already frozen planned tariffs worth $160 billion on Chinese imports, which were due to kick-in on December 15. Duties imposed in September on Chinese goods such as electronics and apparel valued at up to $120 billion will be halved to 7.5%. Beijing didn’t commit to specific reductions of tariffs on over $100 billion in US goods under the agreement.


In addition, the agreement includes some vague references to technology transfer and Intellectual Property. To oversee the accord, a Bilateral Evaluation and Dispute Resolution Arrangement has been put in place, allowing both parties to monitor the implementation of the phase one deal. [1]


This deal does not mean an end of the trade war between U.S. and Chinese imperialism. According to Hannah Anderson, global markets strategist from JP Morgan Asset Management, “the US tariff rate cut included in the agreement only reduces the average tariffs on Chinese imports to 19.3 per cent (from 3.1 per cent before this trade war started). And the key issues in the US-China economic relationship remain unaddressed. [2] Likewise, the Chinese tariffs on U.S. imports also remain in place.




A Compromise




The “phase one” deal represents a compromise with no side as a clear winner. Trump initially thought that “trade wars are easy to win” and hoped to bring China’s leadership to their knees. He rejected any partial agreements. However, China’s resilience, another Great Recession beginning, the dramatic consequences of the trade war for U.S. farmers – a core electorate of Trump – and the fact that Trump faces Presidential elections in November with dim prospects, has forced him to accept such a compromise. Likewise, the Xi Administration did look for a compromise given the slowing down of the Chinese economy in the past 12 months. Today, the National Bureau of Statistics in Beijing announced that China’s economy grew by 6.1 per cent in 2019, the lowest annual growth rate for 29 years. [3]


Sectors of the capitalist class on both sides are not satisfied with the compromise. A day after the United States and China signed the trade agreement, American industry leaders were urging talks for the next phase to begin. The US Chamber of Commerce, which represents three million companies across U.S. industry, urged “both parties to begin negotiations on phase two as soon as possible”. [4]


Likewise, “there are elements of the Chinese commercial establishment – strong interest groups and state industry – that feel that they gave away too much,” Dane Chamorro, a former US diplomat and senior partner with risk consultancy firm Control Risks, said. “They feel like they were strong-armed or railroaded into something, even if the terms are reasonable. [5]


As a result of dissatisfaction among sectors of the U.S. corporations, Trump is pushing now to start a new round of talks right away. However, China has already rebuffed this proposal.


For that reason, a number of bourgeois experts have a rather sober assessment of the deal. Bates Gill, an expert on Chinese security policy at Macquarie University in Sydney, said of the initial trade deal: “The broader, darkening picture is not going to be brightened much by this deal.” And Wang Heng, a professor at the University of New South Wales in Sydney who studies the China-U.S. economic relationship, said: “We can see Phase 1 as an emergency treatment to lower the temperature, but it has not addressed the fundamental problems. [6]


Capital Economics, a London-based research consultancy, stated that it is highly sceptical that the planned negotiations on a more comprehensive “phase two” agreement will ever take place: “There is no timetable for further negotiations on state subsidies and the other structural concerns of the US side. Talks may resume at some point but a substantive phase two deal on structural issues is unlikely ever to be signed. (…) The two sides’ inability to reach agreement on structural issues means that the shadows these are casting over the bilateral relationship will remain. [7]




Inter-Imperialist Rivalry




The compromise character of the “phase one” deal becomes even more evident if we look at the background of the conflict. As Marxists have explained for a number of years, the past decade has seen the rise of China as the second-largest imperialist economy only behind the USA. China has already overtaken its rival in world trade and industrial production. Washington is even more worried by the fact that Chinese corporations are becoming leaders in high-technology sectors like 5G – the latest generation of mobile networks – or in Artificial Intelligence.


Neither is this conflict restricted to the economic level as the political and military tensions in the South resp. East China Sea demonstrate. Hence, as the RCIT has elaborated in a number of documents, the Global Trade War is only one element of a comprehensive rivalry between the two largest imperialist Great Powers. [8]


These developments reflect one of the most important characteristics of the historic period which opened in 2008: the emergence of China (and Russia) as a new imperialist power and the drastic acceleration of the inner-imperialist rivalry between the Great Powers and, in particular, between the U.S. and China. [9]








In conclusion, we can say that the truce is with utmost certainty only a temporary ceasefire. Since the fundamental causes of the bitter rivalry are still in place and since we are at the beginning of another Great Recession with dramatic consequences for the whole capitalist world economy, the antagonism between the two powers will break out again rather sooner than later. Hence, both Washington as well as Beijing are preparing for the next and probably more explosive round in their Cold War.


As an example, we draw attention to a remark in an editorial of the Global Times – the mouthpiece of the Stalinist-capitalist regime in Beijing – on the “phase one” deal. In this article, the pen pushers of the regime suggest that Beijing might finance the increase of U.S. imports by substantially reducing its US treasury bonds. As China is the largest foreign holder of U.S. government debt, this could put substantial pressure on its rival. [10]


Last but not least we want to point out that the truce in the Global Trade War reflects that Washington has not succeeded to bring Beijing to its knees. This is another important confirmation of the RCIT’s analysis that China is neither a “semi-colony” nor a “sub-imperialist” country – as various socialists mistakenly believe – but rather an imperialist Great Power which can stand up against the long-standing Western hegemon.


It is crucial for socialists to understand the imperialist character of all Great Powers – those in the West as well as those in the East. Without such an understanding, they are in danger to side with one of these imperialist camps and, thus, to become social-imperialist fellow-travellers.


In contrast, the RCIT advocates intransigent opposition against all imperialist Great Powers. As we said in our programmatic statement on the trade war: No to a global trade war! Oppose Great Power jingoism in West and East! Against militarist saber-rattling! In imperialist states, socialists say: “The Main Enemy is at Home!” In case of sanctions or a trade war between the U.S., China, European Union, Russia, Canada, Japan, or other powers, socialists in all countries involved must oppose such sanctions.


This was and remains the only Marxist program to fight against the imperialist Great Powers and their Global Trade War!


[1] Economic and Trade Agreement between the Government of the United States of America and the Government of the People’s Republic of China, https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china/phase-one-trade-agreement/text

[2] Quoted in Sidney Leng: China phase one deal with US will allow chance for domestic reform, despite short-term sting, 16 January 2020 https://www.scmp.com/economy/global-economy/article/3046427/china-phase-one-deal-us-will-allow-chance-domestic-reform

[3] Orange Wang: China GDP growth last year was 6.1 per cent, slowest rate for 29 years, 17 January 2020 https://www.scmp.com/economy/china-economy/article/3046476/china-gdp-growth-last-year-was-61-cent-slowest-rate-29-years

[4] Quoted in Jodi Xu Klein: What does American business call the US-China trade deal? A start, 17.01.2020, https://www.scmp.com/news/china/diplomacy/article/3046467/what-does-american-business-call-us-china-trade-deal-start

[5] Quoted in Nile Bowie: Phase one fanfare masks phase two gloom, 16.01.2020, https://www.asiatimes.com/2020/01/article/phase-one-fanfare-masks-phase-two-gloom/

[6] Quoted in Andrea Shalal, Cate Cadell: Trade deal no panacea for rocky U.S. relations with China, 16 January 2020, https://www.reuters.com/article/us-usa-trade-china-relations/trade-deal-no-panacea-for-rocky-u-s-relations-with-china-idUSKBN1ZF1ES

[7] Quoted in Gordon Watts: Cracks appear in US-China ‘détente’ deal. 16.01.2020, https://www.asiatimes.com/2020/01/article/cracks-appear-in-us-china-detente-deal/

[8] The RCIT’s documents on the Global Trade War have been collected at a special sub-page on our website: see https://www.thecommunists.net/worldwide/global/collection-of-articles-on-the-global-trade-war/; our fundamental position has been summarized in a programmatic statement “Global Trade War: No to Great Power Jingoism in West and East!” which has been published in 10 languages (in English: https://www.thecommunists.net/rcit/joint-statement-on-the-looming-global-trade-war/). The latest essay is by Michael Pröbsting: The Point of No Return Seems to Have Been Passed. Intensified Global Trade War, currency war and arms race open a new stage in the U.S.-China Cold War, 7 August 2019, https://www.thecommunists.net/worldwide/global/point-of-no-return-in-u-s-china-cold-war/

[9] The RCIT has published numerous books, pamphlets and articles on the rivalry between the imperialist powers. See on this e.g. our recently published book by Michael Pröbsting: Anti-Imperialism in the Age of Great Power Rivalry. The Factors behind the Accelerating Rivalry between the U.S., China, Russia, EU and Japan. A Critique of the Left’s Analysis and an Outline of the Marxist Perspective, RCIT Books, Vienna 2019. The book can be read online or downloaded for free here: https://www.thecommunists.net/theory/anti-imperialism-in-the-age-of-great-power-rivalry/. On the RCIT’s analysis of China and Russia as emerging imperialist powers see the literature mentioned in the special sub-section on our website: https://www.thecommunists.net/theory/china-russia-as-imperialist-powers/.

[10] China promised a $200 billion increase in purchases of US goods and services over two years. China's trade surplus with the US is indeed too large. Much of China's foreign currency has been spent on purchasing US treasury bonds. This is not an ideal trade-financial structure in the long run. Moving toward a trade balance is a healthier direction for China-US economic cooperation.” (Global Times: US faces pressure to increase exports, 16.01.2020, https://www.globaltimes.cn/content/1177128.shtml)