Sino-American Trade War: Self-enforcing Contracts and Phase One Agreements
Student Type
Graduate
University
Old Dominion University
Country
United States
Document Type
Conference Paper
Description/Abstract
Sino-American bilateral trade relations have increased significantly in the past 4 decades after China started its economic reforms. The bilateral expansion in trade has been accompanied by an increase in complexity and tensions too, which emerged in the form of U.S.-China Trade War after President Trump came to power. After series of tit-for-tat tariff increases, in an attempt to address concerns through negotiations, both sides reached to Phase One Agreement to be followed by other phases. However, the commitments made in the agreement were not met. In my thesis, I use “self-enforcing contracts” theory to analyze phase one agreement. The examination indicates that Phase One Agreement lacked components of self-enforcing contracts, providing players with other profitable strategies to deviate to. The thesis proposes strategies for a self-enforcing Phase Two Agreement, which would ensure parties’ compliance to the agreement and long-term gains.
Keywords
U.S.-China relation, Trade war, Game theory, Contract enforcement
Disciplines
International and Area Studies
Session Title
Insight Into US-China Relations
Location
Webb Center, Isle of Wight Room
Start Date
February 2023
End Date
February 2023
Sino-American Trade War: Self-enforcing Contracts and Phase One Agreements
Webb Center, Isle of Wight Room
Sino-American bilateral trade relations have increased significantly in the past 4 decades after China started its economic reforms. The bilateral expansion in trade has been accompanied by an increase in complexity and tensions too, which emerged in the form of U.S.-China Trade War after President Trump came to power. After series of tit-for-tat tariff increases, in an attempt to address concerns through negotiations, both sides reached to Phase One Agreement to be followed by other phases. However, the commitments made in the agreement were not met. In my thesis, I use “self-enforcing contracts” theory to analyze phase one agreement. The examination indicates that Phase One Agreement lacked components of self-enforcing contracts, providing players with other profitable strategies to deviate to. The thesis proposes strategies for a self-enforcing Phase Two Agreement, which would ensure parties’ compliance to the agreement and long-term gains.