US-China trade negotiations: Nearing the finish line?

Prospects

The latest round of trade negotiations between the US and China, which just took place in Beijing, had unexpectedly positive signs. This was a deputy-ministerial level negotiation, in preparation for the ministerial-level meeting scheduled to take place on February 14 and 15. Although the details of this negotiation were not disclosed to the press, immediately after its conclusion, US President Donald Trump announced that he was considering postponing the deadline for the "trade truce". That means the US side is no longer "playing the glove" as before, when imposing a deadline of March 1. If China does not make concessions for the two sides to reach an agreement, the US tax rate on 200 billion USD of Chinese goods will increase from 10% to 25%.

High-level trade talks between the US and China will take place on February 14 and 15. Photo: AFP

President Donald Trump's statement could also imply that negotiations with China are on track, even progressing positively, and the US is willing to give Beijing more time to reach a final agreement to resolve the trade issue between the two countries.

It is undeniable that recently both the US and China have been making efforts to dialogue with the aim of finding a common voice on the trade issue, which is currently the "cornerstone" in the relationship between the two countries. Half a month ago, US and Chinese trade officials met in Washington in a rare atmosphere of goodwill and optimism. US President Donald Trump himself praised the "tremendous progress" after this round of negotiations. Indeed, to some extent, China has made more concessions with commitments to increase the amount of imported goods from the US, meeting one of Washington's key requirements for Beijing.

It is possible that in the latest round of negotiations in Beijing, the two sides will continue to reach “mutually satisfactory” compromises. That is why President Donald Trump has “given the green light” for the possibility of extending the deadline for imposing tariffs on Chinese goods. In any case, the optimistic signs from the trade talks between the two largest economies in the world have also cooled down the tense atmosphere and the risk of a long-term war that could affect the global economy.

From a political perspective, the US and Chinese governments are in dire need of ending the current trade tensions. In the US, President Donald Trump needs the support of voters before the presidential election next year. Solving the “deep-rooted” trade problem with China will be a “plus” for him in the race next year.

On the Chinese side, facing fierce pressure from Washington, officials in Beijing understand that continuing the trade war will only cause "waste of money" for both sides. Although the Chinese economy is still growing, it has begun to enter a period of gradual decline. Over the past 12 months, China's important economic indicators such as industrial production, car sales, retail sales and investment have all fallen to alarming lows. Once trade tensions with the US escalate, China's "economic ship" will not only slow down but also risk sinking. Therefore, Chinese President Xi Jinping has made no secret of his desire to resolve the trade issue through dialogue.

In a letter to Donald Trump late last month, Xi Jinping assessed that the relationship between the two countries was at a “crucial” stage and hoped that the two sides would reach a mutually beneficial trade agreement as soon as possible.

The New York Stock Exchange (USA) rose on February 12 following positive signals from US-China trade negotiations. Photo: AP

Outstanding issues

Although there are many signs that the US-China trade negotiations are gradually coming to an end, reaching a comprehensive agreement will not be easy because the trade dispute is a long-term story between the US and China. China's increased purchase of US goods to reduce the trade deficit with Washington is only a small part of the discord between the two countries. The root of the problem that US administrations have long demanded China to change is the country's economic structure and policies. Over the past 20 years, many US leaders have sought to solve this problem but have not succeeded. China has also repeatedly pledged to make adjustments, but the US side asserted that "the promises from Beijing have not been fulfilled".

Therefore, in the current negotiations, US officials continue to focus on demanding that China change two main issues: first, to buy more US goods and second, that China must adjust economic policies that create special benefits, such as government subsidies, domestic market protection and other legal incentives for Chinese government-affiliated companies. The US also requires China to commit to ending intellectual property theft and commercial espionage and agree to take appropriate sanctions against this type of crime. The strong measure that the Donald Trump administration has proposed is to force China to make specific commitments and actions, otherwise the US will impose tariffs on Chinese goods.

Beijing has shown a willingness to make concessions on further opening up to US goods. But the sticking point is “structural reform.” With ambitions to increase its global influence and standing, the question is how much more compromise can China make? Many experts say that seemingly positive signs in trade negotiations may not be what they seem. China’s new foreign investment law is a notable example.

According to The Wall Street Journal, although this draft law has now resolved a number of issues that have long been criticized by foreign companies, such as the commitment to protect intellectual property rights and prohibit forced technology transfer, the draft still has many unclear points regarding national security assessments and the government's right to confiscate...

In addition, another important issue is whether the US and China can narrow the gap that is separating the two sides or not? Those are the thorny and difficult issues to resolve in the current negotiations between the US and China. To what extent will the two sides resolve those challenges? The answer will be clearer after the high-level US-China trade negotiations in Beijing on February 14 and 15./.