Trade talks need to focus on structural reforms, says former Commerce official

Key Points
  • The trade truce between the U.S. and China is a step in the right direction, says former U.S. Under Secretary of Commerce Stefan Selig.
  • Still, Selig says structural reforms are needed to create fair trading practices that benefit U.S. businesses.
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Stefan Selig, a former U.S. undersecretary of Commerce for international trade, called the pause in U.S.-China trade tensions a step in the right direction, but told CNBC the Trump administration needs to focus on structural reforms to make it easier for U.S. businesses to compete in a fair market.

"The question is, as opposed to focusing on this one tweet-able soundbite of $200 billion of increased exports to China, are we really going to get at the re-structural reforms necessary to make it better for U.S. businesses to compete fairly in that market?" Selig said Monday on "Power Lunch."

Earlier this year, President Donald Trump proposed tariffs aimed at China to correct what he called unfair trading practices by the country. China quickly retaliated with possible tariffs of its own, a move that left market watchers on edge with fear over a possible trade war.

But on Sunday, Treasury Secretary Steven Mnuchin put investor anxieties to rest — for the moment — when he said a possible trade war between the U.S. and China is "on hold." The world's two largest economies agreed to stop their tariff threats while talks continue. Mnuchin said the situation was a "trade dispute all along."

"It was never a trade war," Mnuchin said Monday on CNBC's "Squawk Box."

"For our farmers, this is going to be fabulous right away," he said, and added that the U.S. has made "very meaningful progress" in negotiations with China.

Casey Guernsey, a seventh-generation farmer in Missouri, and a former Missouri state legislator, told CNBC that he is "grateful" that Trump administration is making progress in regard to trade.

"It eases anxiety for farmers knowing that we're moving forward in a positive way when it comes to China," Guernsey said Monday on "Closing Bell."

Trump took to Twitter to promote the latest developments.


Selig, who is now managing partner of BridgePark Advisors, a consultancy he founded, agreed it was a step in the right direction for both U.S. businesses and the stock market, but warned the administration that focusing too much on deficit numbers would not resolve the underlying problem: unfair trading practices.

"My biggest concern is, in that $200 billion, it's not going to be an overall trade deficit reduction," said Selig, who worked at the U.S. Department of Commerce from June 2014 to June 2016. "We're basically pushing on a balloon. And overall all we're going to do is either increase the deficit with some other country. Or, decrease the surplus we have with some other country, if we continue to focus on this one bilateral trade deficit number."

"We're selling [$12 billion] of roughly $22 billion of soybeans to China as it is," Selig said. "So even if we sell them every last soybean that we own, or produce, that's only going to make up a small portion of that $200 billion."

Larry Kudlow, director of the National Economic Council, told reporters Monday he wasn't sure how long the pause would last for. Still, stocks surged Monday morning after the news, sending the Dow Jones industrial average above 25,000 once again.