Big deals ‘lose-lose’ for Trump, Xi

Chinese President Xi Jinping likes to talk of “win-win” diplomacy, and President Donald Trump’s official visit to Beijing would seem to fall into that category. Trump departed with a very tweetable $250 billion in deals to brag about to his supporters. Xi, like so many Chinese leaders before him, appears to have shipped off the barbarian chieftain with a few baubles to distract him from harassing the empire.

The reality, though, is that the Trump-Xi summit was a “lose-lose” proposition. By focusing on headline-friendly deals, the two leaders shunted aside the difficult economic challenges facing the U.S.-China relationship — and set back the long-term interests of both their nations.

Sure, we shouldn’t sniff at a quarter-trillion dollars — even if many deals, merely in the memorandum stage, may never materialize. Whatever develops will be a boon for U.S. businesses and farmers. And Xi benefits, too. By appeasing a White House obsessed with trade deficits, Xi could deflate, at least temporarily, mounting pressure in Washington to take action against unfair Chinese business practices.

But there’s the rub. Trump didn’t do U.S. businesses any favors by failing to address the major issues they face in China. U.S. CEOs want China’s government to open its market more widely to foreign business, better protect their intellectual property, stop extracting technology in exchange for access and treat their companies as equals to their Chinese rivals. Trump barely flicked at these problems. In fact, he went even further, practically absolving China of responsibility for treating the United States unfairly. “I don’t blame China,” he said. “After all, who can blame a country for being able to take advantage of another country for the benefit of its citizens?”

For his part, Xi was only too happy to dodge. Trump’s soft-glove approach has ensured China can continue to pursue a nationalistic agenda to upgrade key industries, amply subsidized by the state.

Yet Xi shouldn’t feel too proud of himself. The same reforms Trump should have been pushing would help the Chinese leader achieve his goals, too.

Opening China’s market would enhance competition, and improve the performance of Chinese companies. That would help control risky debt and enliven sagging productivity. A more open economy would also encourage greater consumption, which would in turn give a boost to healthier growth.

Stricter protection of intellectual property would entice foreign firms to import much-needed technology into China and spur local entrepreneurs to innovate. And by taking such steps, China would go a long way toward dissuading the United States and other governments from erecting protectionist hurdles to Chinese business. That would ensure Chinese companies the continued free access to foreign markets they need to expand internationally, thus fulfilling yet another of Xi’s economic priorities.

Perhaps Xi will arrive at the conclusion that such reforms are necessary. But some swift kicks from the United States could speed that process. Without external pressure, Xi has a lot less incentive to undertake changes that would transform the country’s state-led economic system and threaten players who currently benefit from it.

Such high-profile summits are often more about cooperation than confrontation. Once back in Washington, Trump may toughen his stance and press Xi harder. Perhaps Xi will march forward more quickly on reform, as many China watchers hope.

But those are all maybes. What was missed was an opportunity for the world’s two most powerful men to tackle decisions on issues that could shape not just the future of the U.S.-China relationship, but the growth prospects and competitiveness of both economies. That truly would have been a win-win.

Michael Schuman is the author of “Confucius: And the World He Created.” He wrote this for Bloomberg View.