With President Donald Trump making massive strides toward peace and stability surrounding North Korea, the media cannot accept -nor allow- the common sense solutions to succeed.  President Trump is clearly perceived as a risk because his success highlights just how useless and manipulative a professional political class of consultants, advisors and DC think-tanks really are.

The U.S. media are desperate to find something to criticize and openly cheering for failure, so long as it provides fuel for their anti-Trump narrative.  It is stunning to watch against the backdrop of President Trump cutting the Gordian knot known as North Korea.

Perhaps by training, by habit or by unintended consequence, the DC proletariat have developed a system for themselves where the process itself as the end result.  This allows them to wax philosophically about problems; but it is within the discussion of the problem itself where their industry exists.  Solutions are not wanted because that stops the process.

DC journalism has evolved into reveling about the never ending process and, as a consequence, media completely ignore the end point, miss the bottom line, don’t actually SEE the subject matter, and never actually attempt to discover solutions.

If you watch this nonsense long enough you realize those inside the industrial media complex avoid the subject matter deliberately; because if they get their heads around it and nail it home, they won’t have anything to talk about – they will have exhausted their stash.

As part of their unspoken strategy when they encounter a solution driven approach, the media (writ large) fall back on the Gruber Principle: relying on “the stupidity of the American voter” not to understand how the lies and talking points are being distributed.

Today’s example surrounds President Trump and the ongoing negotiations with China.  Into this dynamic Huawei Technologies Co. Ltd surfaces as an entity on the U.S. Commerce Dept. restricted “Entity List” on May 16, 2019.

On May 20th, 2019, Commerce Secretary Wilbur Ross announced the U.S. Dept. of Commerce, Bureau of Industry and Security, would be issuing Temporary General License (TGL) permits for U.S. business interests who wish to engage in commercial exchanges with Huawei.

The Commerce Department reviews each request, outlines what products can be exchanged, and restricts the company to a transaction of product approved by the license.  Each license lasts 90-days.

“The Temporary General License grants operators time to make other arrangements and the Department space to determine the appropriate long term measures for Americans and foreign telecommunications providers that currently rely on Huawei equipment for critical services,” said Secretary of Commerce Wilbur Ross. “In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks.”  (link)

Additionally, with the exception of the transactions explicitly authorized by the Temporary General License, any exports, reexports, or in country transfers of items subject to the Export Administration Regulation (EAR) will continue to require a special license granted after a review by the Bureau of Industry and Security (BIS) under a presumption of denial.

Under the new regulations any company wishing to engage in a commercial transaction with Huawei has to apply and gain pre-approval from the U.S. Commerce Department.  Hence, the issuance of a 90-day license.  Any product or service not approved by the license is not allowed to be exchanged.

This process began on May 20th and still exists today.  This process is what President Trump was referencing when he announced the U.S. and China would restart trade negotiations as it related to Huawei.  Specifically when the president said: “Ross will evaluate each request”.

Nothing can be purchased from, or sold to, Huawei Technologies Co. Ltd and/or its sixty-eight non-U.S. affiliates, without getting permission from the U.S. commerce department.  Nothing in the agreement between President Trump and Chinese Chairman Xi Jinping changes that process.

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If Beijing was not going to accept the closed chapters of the prior negotiation; a position they previously rebuked; then there would be no starting point between the Chinese and U.S. teams.  We don’t like to make too many assumptions, but common sense would indicate the agreements between all parties, prior to the collapse, is now the agreed starting point.

If accurate (obviously details to be identified later) this would indicate that the hawks in Beijing, those who formerly balked, have now retreated from their antagonistic position toward the agreement negotiated by Liu He.

It is likely they saw growing ramifications and consequences over the past 30+ days.  In essence, after getting a taste of what was coming, Beijing saw a cycle of continual collapse as their future; they had no option but to try and stop the downward spiral.

This internal outlook, overlaying their historic zero-sum perspective, would make sense given the latest developments; party because the reality of an increasingly losing position was their new baseline. A cessation of further damage was their best scenario.

Summary: Trump forced Beijing to see less-loss as the better loss.

However, as noted in the attitude of President Trump, he retains the larger tariff level despite China’s re-engagement.  Trump has allowed the restart itself to be the face-saving Xi needed, yet he retains the prior tariff gains.   Team Trump yielded nothing back.

Do not take this dynamic lightly.  China has never negotiated for, nor accepted, less-lossbefore.  Understanding this is new ground for them we can only imagine the anxiety within internal discussions.  Vice-Premier Liu He cannot turn to the Beijing Hawks and say: ‘I told you so’. He can only start again and hope the same outcome does not repeat.

Both teams know the prior closed chapters were negotiated in good faith by Liu He, Robert Lightizer and Mnuchin.  It wasn’t the U.S. who walked away from prior commitments. Therefore it makes additional sense for Chairman Xi to offer the Ag purchases as a show of good faith; and, in turn, President Trump gives the optics of compromise on high-tech.

Returning to the original point of collapse, the stickler point was/is the enforcement mechanism if China cheats.  This is where Lighthizer had built sector-by-sector, product-by-product, escalating and countervailing tariffs into the compliance chapters.

Unlike traditional trade agreements with one enforcement chapter that encompasses all of the sectors within the aggregate agreement, Bob Lighthizer built specific enforcement mechanisms into each sector.  Essentially, each product had it’s own compliance requirements unique to the sector of trade.

That multi-layered compliance is where China recoiled because they saw the U.S. as having ultimate decision-making about whether the rules were being followed.  However, that construct was/is the unidirectional price Lighthizer was applying due to the history of Chinese duplicity and cheating.

Any U.S. company (or U.S. entity) harmed by Chinese trade practices (ie. ‘cheating‘, ‘theft’, ‘coercion’, etc.) would have a set of enforcement provisions to protect their interests specific to their unique sector inside the agreement.  The scale of this approach is rather overwhelming to consider; however, as Lighthizer told congress this is the only way to insure compliance and protect very diverse U.S. trade interests.

You have to write the agreement while predicting the other party will attempt to lie, cheat and steal; and they will do so with the sanctioning of the communist government.

Lost in all of the discussions by western media is the fact that no-one has ever attempted to structure a comprehensive and enforceable trade agreement with China before.  What the U.S. team is attempting will be the road-map for all other nations who will likely write similar agreements of their own.

Writing a trade agreement between a free-market (USA) and a controlled-market (China) is where the challenge lies.  One of the inherent issues will always be how the free-market system can hold the controlled-market system accountable if they cheat.

Given the controlled-market’s governmental support for the cheaters, the accountability will naturally have to come from outside the system.   It remains to be seen if it can be done.

Arguably President Trump has a disposition that he doesn’t see how a deal is possible. However, Trump is willing to allow Lighthizer, who really is brilliant (along with Secretary Mnuchin and Secretary Ross), plenty of space to approach this problem with unique solutions.

As President Trump just said: “The quality of the transaction is far more important to me than speed. I am in no hurry.”

The tariffs will continue until behavior improves.