President Trump meets with Chinese President Xi Jinping in Osaka, Japan, June 29, 2019. Photo: Xinhua/Ju Peng via Getty Images

President Trump says the initial trade agreement between the U.S. and China is "righting the wrongs of the past," referring to what he views as China's exploitative economic and trade policies. But Beijing is sidestepping that narrative.

The big picture: Domestically, China is presenting the "phase one" deal not as concessions made to a superior foe, but as the logical next phase of its own economic development.

China is casting this agreement as a welcome boost to its transition to an innovation-based economy.

  • In general, intellectual property protections benefit countries that produce new technology.
  • Countries that primarily consume, rather than produce, intellectual property have little incentive to enforce a tough IP protection regime.

Beijing presents its official view right in the text at the top of the agreement:

  • "China believes that enhancing intellectual property protection and enforcement is in the interest of building an innovative country, growing innovation-driven enterprises, and promoting high quality economic growth."
  • Paul Haenle, chair of the Carnegie-Tsinghua Center for Global Policy in Beijing, told NPR that most of this positive messaging "seems geared towards the Chinese people, to say, 'We are not going to allow the Americans to slow our rise, to obstruct our rise.'"

Between the lines: China's agreement to purchase a set amount of American products may boost the U.S. economy in the short term, but in some ways, it's at odds with long-term U.S goals.

  • "Purchasing commitments are more in line with a state-driven economic model than a market-driven model, the latter of which the United States aims for China to adopt," according to an analysis published on Jan. 15 by the Center for Strategic and International Studies.


  • The deal, which eases the two-year-long trade war between the countries, reduces tariffs on $120 billion in Chinese goods, though it leaves most tariffs in place —including 25% tariffs on Chinese products that U.S. factories use to assemble goods.
  • It also lays out rules for the protection of patents and other intellectual property.
  • China agreed to buy $200 billion in U.S. products and services over the next two years.
  • The agreement includes an evaluation and enforcement framework that the U.S. hopes will help safeguard intellectual property from the rampant theft that has long plagued U.S. organizations.
  • It avoids thornier structural issues, such state subsidies for some of China's top companies that the U.S. has long decried as unfair.

What's next: There's still a long road ahead to a future "phase two" deal that addresses deeper structural concerns about the Chinese economy. For now, watch for signs that the new evaluation and enforcement mechanism is doing its job.

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Dion Rabouin, author of Markets
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