Positive signs in US-China trade talks

Friday, 2019-05-03 12:48:52
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China’s Vice Premier Liu He (C) pose for a photo with US Treasury Secretary Steven Mnuchin (R) and US Trade Representative Robert Lighthizer (L) at Diaoyutai State Guesthouse in Beijing on March 29, 2019. (Reuters)
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NDO – The trade negotiations between the United States and China are expected to reach an agreement in the second half of this month as both sides have sent out positive signals. However, most analysts have stated that although a deal can be obtained after the next round of negotiations, trade frictions will still remain a big problem in the US-China relations in the future.

The US-China trade war broke out in the middle of last year, with the two sides continually imposing retaliatory tariff measures, which has caused losses worth billions of dollars for themselves and threatened to hinder global economic growth. Up to now, the total value of higher taxed goods between the US and China has reached more than US$360 billion. President Donald Trump’s administration wants to maintain the additional duties currently being imposed on imports from China until Beijing executes its commitments on a regular basis. On the Chinese side, Beijing has urged the US to immediately abolish additional tariffs after a bilateral trade agreement is signed.

In an effort to terminate the aforementioned trade war, the US and Chinese leaders agreed to a ceasefire in their trade battle in late 2018 to negotiate a deal. So far this year, the two sides have conducted many rounds of negotiations and have gradually attained a consensus. Both the US and Chinese officials are optimistic about the prompt ending of the “no-win” war mentioned above. In the latest round of talks taking place in Beijing on May 1, US Treasury Secretary Steven Terner Mnuchin announced that he and US Trade Representative Robert Lighthizer had “effective negotiations” with Chinese Vice-Premier Liu He. Previously, when speaking to the media at the White House, President Trump had voiced his optimism that trade negotiations were going quite well and would come to a success. He also left open the possibility that a statement on the outcome of the negotiation process would soon be released.

The US-China trade talks take place in the context of both sides having suffered huge losses and fatigue due to mutual sanctions. China’s economic growth rate has slowed down in recent quarters, owed partly to the negative impacts from the trade war with the US. As for the US side, President Donald Trump is making urgent preparations for his re-election campaign in the 2020 US presidential election. Therefore, a good result for the US in trade negotiations with China will bring benefits to President Trump. Besides, the US business community has pressured the government to end its trade war with China. The “Americans for Free Trade” coalition has sent a letter to President Trump asking for the immediate removal of all tariffs if the US and Chinese officials reach an agreement, explaining that the current US tariff measures against Chinese goods are damaging US workers, farmers and consumers. According to the coalition, people in the US have been forced to pay a total of more than US$21 billion in taxes due to the government’s new tariff measures.

Analysts stated that in the aforementioned context, both Washington and Beijing have accepted concession the recent rounds of talks, which has partly helped to remove knots in the disagreements that seem impossible to be bridged between the two sides. Recently, China adopted a new foreign investment law with a commitment to strengthening the protection of investors and the abolition of some requirements on technology transfer, thereby resolving one of the most difficult issues in the US-China trade negotiations concerning intellectual property rights. Beijing has also pledged to reduce the trade surplus with the US to zero within six years and will maintain the yuan’s exchange rate at an acceptable level. Washington has also mitigated its requirements for Beijing in negotiations, including the removal of strict requirements regarding China’s subsidies to businesses.

Currently, it is expected that the high-level talks and meetings between the US and China this month will help the two sides to end their trade war. The media of both countries have cited President Trump as saying that he would soon welcome Chinese President Xi Jinping at the White House aiming to establish a foundation for a potential trade agreement between the world’s two largest economies. According to the announced plan, ahead of the US-China summit, Chinese Vice-Premier Liu He will lead a Chinese delegation to Washington to conduct another round of talks with US trade officials, starting on May 8.

Despite the positive signs in US-China trade negotiations, observers are still not so optimistic about the two sides completely terminating their trade war through an agreement, to be reached immediately this May, because there still remain disagreements on some important points in the bilateral negotiations. The US affirmed that the main issues that the two sides need to agree on are “a mechanism to enforce the agreement” and “a roadmap to remove tariff measures” that they have imposed on each other. Meanwhile, the Chinese side’s standpoint is that a mechanism to enforce the agreement is important but must “ensure it has a two-way impact”, not just aimed at limiting China.