The most important determination to be made in a US-China trade dispute resolution is “which side will go first”. This will determine how a deal is enforced.
The US wants China to perform before tariffs are removed, while China wants tariffs removed before performance.
The parties may agree on everything, but if they can’t agree on “this”, then there’s no deal. It’s not just about which side will concede. Here’s the big issue no one’s articulating: To determine which side goes first is also to determine which party has the “burden of proof” going forward- an enormous matter.
If China performs with tariffs in place, it would have the “burden of proving its performance” before tariff removal. If the US removes tariffs first, the US would have to track China around the globe and investigate China’s activities across the world, with the “burden of proving material nonperformance” before levying tariffs- a Herculean task, at great cost to taxpayers.
In the former scenario, China would work hard to prove compliance. In the latter, China could delay responses, conceal activities, and prolong investigations.
It’s not what you know … it’s what you can prove.
Who wants “that” burden?
Why should the U.S. accept the burden to “re-prove” violations we already know of? Why should U.S. taxpayers pay to “re-prove” that China is not following international laws or global trade practice, or to “disprove” that China is honoring its covenants.
This is and has always been about “China’s” activities and violations. It should be China’s burden to prove its performance, at China’s expense- and that requires China to go first.
So, why do I say that the burden of proof is on the U.S. once tariffs are removed as part of a trade dispute resolution?
If the administration wants to put tariffs back on after removing them- it will have a very high bar. It will have to not just prove non-compliance, but “material” non-compliance. The administration will have to make a good and specific case to:
- China (which, after making economic and systemic structural change would be irate)
- US consumers and voters
- US businesses
Even if China has the burden of proving performance- and fails, the administration would have a heck of a time putting tariffs back on without “excellent” reasons for doing so, and proving those reasons, with facts, without and within the United States, especially if the economy is weak.