VIEW China-US trade negotiations: Need to persevere until impending end
By Yu Donghui
Yu Donghui
Between late April and early May, the U.S. and China are pushing forward with trade negotiations, hoping to ratify the final treaty before a bilateral summit between their heads of state.
After initial progress in April, President Donald Trump said we would see a conclusion of negotiations in four weeks. Along with this statement, the China-U.S. trade deal is approaching its final stages after a turbulent path. Now it is time to end the Sino-American trade war that has lasted a year.
As Trump put it, “A lot of really good things have been negotiated and agreed to, and the U.S. and China had agreed on a lot of the most difficult points” in trade negotiations.
From his statement, we can see that the impending deal will be “very comprehensive” and “topical.” Also, Trump recently announced President Xi Jinping's White House visit, illustrating Trump's will to conclude the deal with China as soon as possible. With the 2020 U.S. presidential election approaching, Trump needs to revitalize his reputation by bringing “the grand victory” to his people, especially when the American economy and stock market have not been strong, as expected a few months ago.
Since his escape from investigation over the “Russian scandal,” there has been a big increase in the possibility that Trump will again run for the Oval Office, without any risk of impeachment.
The Sino-American negotiations have provided him with a more predictable environment and China, in its turn, now has a motive to maintain a good relationship with Trump, who has a greater chance of winning another four-year term.
The Chinese economy needs to pursue a continuous and stable development trajectory through advanced promises on reforming and opening, as well as enacting those promises. It has been reported that China promised to resolve the U.S. trade imbalance issue with a sizeable purchase in the next six years and to secure a concrete reform procedure in terms of intellectual property and technological transfer in accordance with the “structural reform” that the U.S. focuses on.
Even though Trump still faces domestic hard-liners' pressure not to accept any “weak” deals, there is a consensus that the negotiation needs to be concluded as swiftly as possible with a deal both parties can accept. The biggest obstacle remaining is whether the U.S. will maintain tariffs on Chinese goods worth $250 billion to utilize the measure as a one-sided “tool of legal enforcement.” If the U.S. were to maintain this particular clause and use it as a sanction if China failed to comply with the agreement, this approach will not sit well with the Chinese who will deem it as an “unfair agreement.” If the tariffs persist, it implies that the trade war is not over and could intensify.
Last year proved that the trade war is hurting both parties. In 2018, American exports grew 7 per cent worldwide while Chinese exports shrank 7 per cent. During the first two months of 2019, Chinese exports to the U.S. decreased 20 per cent. The International Monetary Fund (IMF) warns that American efforts to decrease its trade deficit with China by imposing tariffs before the trade negotiations are doomed to fail. The latest IMF report argues that imposing 25 per cent tariffs on Chinese goods to the U.S. amounts to $540 billion annually, and Chinese retaliation tariffs worth $120 billion on American goods negatively impact American gross domestic product (GDP) by 0.3 to 0.6 per cent while decreasing Chinese GDP by 0.5 to 1.5 per cent.
Trump has hoped for the return of manufacturing industry to the U.S. and an influx of foreign investment, as well as the creation of American jobs. However, the China-U.S. trade war has affected the American investment environment and, in the current era of highly globalized industries, it discourages Chinese businesses from investing in the U.S. and harms international enterprises linked to China in terms of manufacturing.
According to a U.S. survey, the American trade deficit with China reached its highest of $419 billion. The resolution of the deficit through a trade war has not panned out as Trump hoped. Now he is faced with the pressure of a new election after the successful implementation of his campaign promises. Even if there were to be an “incomplete deal,” as many American experts predict, there exists a reason to end a trade war that benefits nobody.
Of course, Trump's fickleness faces pressure from hard-liners on China and there are geopolitical, strategic and competitive elements to consider before ratifying the deal between the U.S. and China, making it hard to call the deal a success.
White House trade adviser and hard-liner Peter Navarro cited his Chinese negotiation counterpart, saying “the last mile of the marathon is actually the longest and the hardest.” It is still indeed questionable whether Sino-American strategic competition will ease even after negotiations end.
Yu Donghui is the chief U.S. correspondent of the China Review News Agency. He is based in Washington, D.C., to cover major events in the United States. During his nearly three-decade career in journalism, Yu has reported numerous major events involving U.S.-China relations and cross strait relations, giving him wide experience and expertise in international affairs.Yu has a bachelor's degree from Xiamen University and a master's degree in international relations from George Washington University. Song Min-ju, a researcher at the Global Security Cooperation Center, translated the article.