US-China negotiations: 'Old rope breaks rope'?

Last Minute Changes

The US-China trade negotiations are in a "smooth sailing" position after the penultimate negotiations between the two sides in Beijing last week. Speaking on May 1, US Treasury Secretary Steven Mnuchin said he and US Trade Representative Robert Lighthizer had "productive talks" with Chinese Vice Premier Liu He. On Twitter, Mr. Mnuchin also affirmed: "We will continue discussions in Washington next week." US and Chinese negotiators did not make any statements to the press about the results of the 10th round of negotiations that lasted for many hours. And Vice Premier Liu He is expected to lead the Chinese delegation to Washington for further negotiations starting on May 8.

Chinese President Xi Jinping welcomes US President Donald Trump in Beijing in 2017. Photo: AFP

However, things seem to have gone off the rails since the weekend after a statement by US President Donald Trump on Twitter. On May 5, Mr. Trump said that the tax on $200 billion worth of goods from China would increase from 10% to 25% on May 10, and threatened to soon impose a 25% tax on another $325 billion worth of Chinese goods. On his personal Twitter page, the White House owner said that "for 10 months, China has paid the US 25% tax on $50 billion worth of high-tech goods and 10% on $200 billion worth of other goods." However, he said he would increase the tax from 10% to 25% on Chinese goods from May 10.

According to President Trump, the trade agreement negotiation process between the two countries is still “continuing, but too slowly, as they (China) try to renegotiate”. He affirmed that he will not accept and threatened to impose a 25% tax on an additional 325 billion USD of Chinese goods. Mr. Trump's threat can be understood as the US administration wanting to increase pressure on Beijing before the (possibly final) round of negotiations in Washington this week.

This is a familiar tactic of Mr. Trump, and so far it has proven effective. However, China will not be able to sit still at this decisive moment.

The US-China negotiation process may be interrupted after the US President's threats. Photo: Getty Images

The Wall Street Journal reported on May 5 that China is considering canceling talks with the US this week after US President Donald Trump threatened to raise tariffs on Chinese imports. There is speculation that Chinese Vice Premier Liu He may not be in Washington as planned. On Twitter, the editor-in-chief of the Global Times, the English-language publication of the People's Daily - the mouthpiece of the Chinese Communist Party, Mr. Hu Xijin, a commentator for the newspaper, wrote: "Let (President) Trump raise tariffs. Let's see when trade talks can resume."

In this context, President Trump’s warning is like a “deadline” and puts strong pressure on Beijing. It is not clear how “serious” China is in making this intention, but Beijing understands that the US President also needs a big deal with China as much as China needs to settle this dispute.

The 2020 re-election campaign is clearly a milestone that Mr. Trump is aiming for, forcing him to make more of his mark with domestic and foreign achievements.

Chinese Vice Premier Liu He (4th right) and US Trade Representative Robert Lighthizer (4th left) and Treasury Secretary Steven Mnuchin (3rd left) at trade talks in Washington DC, February 21, 2019. Photo: AFP/TTXVN

THE LONG WAR AHEAD

The uncertainty of the US-China negotiations has been predicted for a long time. Even insiders do not doubt this, despite optimistic statements. Although the US wants to get the desired results, it always shows caution, always "keeping in its pocket" new tax orders on Chinese goods. The Chinese side has not even made any predictions about the final result. What people can be sure of is that there are too many barriers for the two sides to reach a final agreement, because the US and China still disagree on the core interests of both, and neither wants to make concessions overnight.

The US President is even “rushing” to see concrete results before 2020, the time of the US presidential election. Meanwhile, China has set a deadline of up to 6 years for this process. The long journey can help Beijing “stretch” the pressure and “soften” the commitments that are predicted to be very strict.

Unloading goods from China and some other countries at Long Beach port, Los Angeles (USA) in February 2019. Photo: AFP/TTXVN

Even the fact that the two sides have only announced “progress” in many areas, such as intellectual property, forced technology and goods transfer, asking Beijing to limit industrial subsidies, open up markets for US companies to access as well as increase purchases of US goods in the agricultural and energy sectors to narrow the US trade deficit with China... are only considered unclear results.

These may still be obstacles that prevent the two sides from concluding the negotiation process.

On the other hand, there are still key demands from the US side that require major structural changes in China, especially with the world's second largest economy, focusing on the guiding role of state-owned enterprises in business transactions. These demands China has never wanted to compromise, and the "price" to exchange will be very high.

Workers assemble electronic components at a Foxconn technology factory in Shenzhen, China. Photo: AFP/Getty Images

On the other side, Chinese negotiators have been emphatic that any deal must be based on “give and take” from both sides and that China will not seek a solution to trade conflicts by making unreasonable concessions. Revelations from the negotiating table show that Washington insists that the main issues that the two sides need to agree on are an enforcement mechanism and a roadmap for removing tariffs that the two sides have imposed on each other.

Meanwhile, Beijing officials asserted that although they consider the agreement's enforcement mechanism important, it must ensure that this mechanism has a two-way impact and cannot only be aimed at restricting China.

Even if China and the US reach a trade deal, there is still much work to be done. First of all, the implementation of the agreement between the two countries, if reached, is only “the beginning of a long-term process”. The US side stressed that the agreement implementation mechanism includes not only specific micro-issues of the two countries’ businesses, but also broader macroeconomic issues. If the two sides disagree, there is still a possibility of trade frictions reappearing.

The US-China trade war is just the “first battle” in a long and fierce battle between the two superpowers. Photo: AP

Most opinions agree on one point: the US-China trade war is just the “first battle” in a long-term fierce battle between the two superpowers to determine global power and influence. Its significance is not simply the discussions on trade tariffs, but a much broader whole. Battles will continue to appear in many other fields and categories even if there is an agreement in many other fields. And with such a scale of competition, no one is sure what will happen, how large it will be, and how long it will take to end the confrontation between the two superpowers at the top of the world.