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Take trade deal headlines with a grain of salt

On Behalf of | Feb 22, 2018 | Uncategorized

The stream of China visits by Western world leaders is good for the news business. Nearly every one generates big headlines about inked trade deals. In recent weeks, leaders from Britain and France have both visited China. And after each, the leaders announced billions of dollars in deals reached. When President Trump went to China in November, the headlines following touted $250 billion in trade deal signed.

The problem with these announcements, as one legal observer recently noted in the Financial Times, is that they often don’t result in much. He remarks in an opinion piece that the element that is significantly missing from all the pronouncements is whether the purported agreements are hard contracts or memorandums of understanding.

Is it binding or not?

The key distinction between those two types of agreements is that contracts are binding. Memos of understanding often are not. And, obviously, success in creating and maintaining fruitful business relationships depends on ensuring that all involved understand expectations and are committed in writing to fulfilling them.

Returning to the issue of trade deal headlines, the Financial Times analyst offers that one of the biggest problems government administrators face is getting their expressions of understanding matched by a political will to pass legislation required to make real deals possible.

For example, days after Trump’s visit, China declared it would open its financial sector to foreign investors. That’s something China is supposed to have been committed to since it joined the World Trade Organization in 2001. But that commitment remains unfulfilled and, even in the wake of the November declaration, Beijing has not indicated how the pledge will become a reality.

While rhetoric around government aspirations on both sides of the Pacific continues, doing business means finding an experienced team that can help you understand and deal with the legal, economic and cultural realities that exist now.