Todd Bishop
US President Trump issued a Twitter tweet on December 31 stating that China will send a senior representative to the White House to sign the first phase of the trade agreement on January 15, 2020; he will then visit Beijing to start negotiations on the second phase of the agreement . It can be seen that the text translation and review of the first phase of the agreement by the two parties are nearing completion, and questions from the outside world who have long speculated on the details of the agreement will also be answered. As for the question of “Chinese senior representative He Xuren also”, according to earlier media reports, it seems that China’s Vice Premier Liu He, who has been in charge of the Sino-US negotiations, is the only one.
Agreement focuses on supporting Trump election
Although the first-phase agreement that China and the United States are about to sign can’t really solve the fundamental problems and other structural contradictions that cause the trade deficit between the two countries, for Trump facing re-election campaign, signing this agreement with China is very difficult It helps, especially to cater to his agricultural voters and increase morale for the election year. From China’s perspective, the agreement also prevents the trade relationship between the two countries from continuing to deteriorate, increasing economic instability.
Generally speaking, the first phase of the China-US agreement is just an armistice agreement, or a transitional agreement between the US and China, which has three main purposes: First, to meet Trump ’s political needs, such as $ 40 billion to $ 50 billion. US Agricultural Products Export Agreement. This is also Trump’s political selling point in front of voters. The second is to ease the tension between China and the United States and avoid the escalation momentum of the “fight for both” in the original plan in mid-December 2019. The third is for the next second ( Even the third stage) pave the way for negotiations. Of course, analysis generally believes that the second stage of negotiations is more difficult and may last longer.
China also knows that Trump needs such a trade agreement, dominated by agricultural orders. When Trump announced on December 31 that China and the United States were about to sign an agreement, it coincided with the announcement of the Chinese government’s implementation of a tentative import tax rate on 859 commodities from January 1, 2020. This is China’s new initiative to further stimulate economic growth by expanding opening up. The products involved include frozen pork and semiconductors.
In addition, according to US media reports on December 26, the size of China ’s imports of US soybeans reached 2.56 million tons in November 2019, more than double that of October (1.14 million tons). In contrast, in the second half of 2018, China’s purchase of US soybeans was basically zero. As China-US trade talks progress, China is likely to increase imports. It seems that in the final stage of the first phase of negotiations, China is also struggling to fulfill its purchase commitments for US agricultural products.
The United States can also understand that in addition to the actual purchase of agricultural products, the first round of tariff trade war did not bring the economic benefits the United States expected. According to the United States Customs and Border Protection, companies that have imported parts and finished products from China have paid nearly $ 40 billion in additional taxes since Trump first imposed tariffs . Although Trump insists that China is paying these tariffs, most economic studies have found that U.S. companies and consumers have a heavier tariff burden than Chinese companies and consumers.
The second phase of the trade agreement includes issues such as China’s industrial subsidy policy proposed by the United States, cyber theft, and compulsory technology transfer. These issues touch on the core interests of the two countries and the game at the strategic level. Not only is it more difficult to reach an agreement, but even if it is reached, it will take several years for the economic benefits to become apparent. This is fundamentally different from the first phase of the agricultural product purchase agreement.
Decoupling still lingers
From the perspective of the entire negotiation process of the first-phase agreement, both China and the United States can realize that there are hard-liners in each other’s country that can influence the negotiation process and results, as well as pragmatic factions that can make corresponding concessions to reach an agreement. These two forces will continue to compete in the future negotiation process, which is likely to be more intense than during the first stage of negotiations.
In the first phase of the trade war, the United States took a confrontational approach to extreme pressure. Although the two parties have reached the first stage agreement, the implementation of the agreement is still full of uncertainty. Moreover, the hawks around Trump attach great importance to the enforcement mechanism in the first phase of the agreement, and even believe that the mechanism’s requirements for China to honor its commitments are “mandatory”, and the counterattack against the United States is “unilateral”.
This means that in the second stage of the negotiations, the United States still has the possibility to re-use its skills. In this situation, the second stage of the trade negotiations will inevitably be affected, not to mention the second stage itself involves more difficult issues, and it is related to the more direct collision of two different economic systems and ideologies. Under ideal conditions, in 2020, the two sides will focus on technical issues such as import and export control, investment restrictions, and economic sanctions, rather than tangling the issue of tariff increases.
In other words, the second phase of the negotiations between the two countries will focus more on technology, policy, and even law and ideology. By then, more discussions on decoupling will be expected. For example, in the field of technology, issues related to intellectual property theft and compulsory technology transfer may cause decoupling again. Former World Bank President and former U.S. Deputy Secretary of State Robert Zoellick warned at the US-China Business Council on December 4 that the “decoupling” between the US and China in the field of science and technology Become reality.
An article by CNN’s columnist and host and Fareed Zakaria, editor-in-chief of Time Magazine in the first issue of Diplomatic Magazine 2020 criticized China and the United States for the first stage of trade negotiations Decoupling. In his view, the Sino-US decoupling theory is nothing new, and its fallacy is that in the past 40 years, the United States has not taken similar measures to decoupling, and the United States has adopted more than just a policy of engagement with China. , But a deterrent at the same time.
Zakaria believes that the United States must give China a place to integrate into international decision-making, otherwise China will only be free to unilaterally inspect new structures and systems that are in its own interest. Zoellick also warned of the decoupling theory that the Trump administration’s China policy could push Beijing into a parallel system that conflicts with US interests and has very different rules.
Now that Trump has voluntarily mentioned that he will resume the second stage of the discussion during his visit to Beijing, it can also show that the United States does not want to decouple from China at the moment. This is also in line with the US and China’s position of not seeking decoupling as expressed in the 2019 speech by US Vice President Mike Pence. But even so, given the difficulty and complexity of the second stage of negotiations, it is impossible for the “decoupling theory” to exit.
Election year China is no longer the only “target “
The signing of the first-phase trade agreement with China, plus the US-Mexico-Canada Agreement (USMCA) that replaced the North American Free Trade Agreement (NAFTA) with Canada and Mexico, can be said to be the two things that Trump himself values. The “war result” of the trade war. However, even if the first phase of the agreement is signed and the second phase of negotiations is started, the Sino-US trade war has not ended and will continue. Of course, given the difficulty of compromise in the second stage of negotiations, Trump will not use China as the only target.
In the context of the US Election Year, any form of negotiation may be overly politicized by the United States. For political considerations, Trump has turned his finger to multiple countries at the same time. During the first phase of the China-US trade talks, the Trump administration announced in October 2019 that it would impose tariffs on US $ 7.5 billion of EU exports to the United States and threatened to increase tariffs on a range of other products.
In early December, when China and the US reached the first phase of the agreement, Trump mentioned that he planned to resume tariffs on steel and aluminum exports from Argentina and Brazil. He criticized the two South American countries for hurting the interests of American farmers through the devaluation of their currencies, and reiterated his call for the Federal Reserve to relax its monetary policy and fight back.
At the same time, the Office of the United States Trade Representative (USTR) also mentioned that the French Digital Services Tax (DST) discriminates against US companies and is inconsistent with the principles of current international tax policies. In response to the French digital tax, USTR proposes to impose tariffs on US $ 2.4 billion in French goods and consider investigating Italy, Turkey and Austria on digital tax.
Vietnam could also be another target. The Trump administration has also noticed that during the trade war between the United States and China, Vietnam ’s exports to the United States increased significantly, filling the gap left by the decline in Chinese exports to the United States. Some target manufacturers have also shifted production lines from China to Vietnam in order to circumvent the US tariffs.
In addition, China has also increased computer and electronics exports to Vietnam. There are concerns in the United States that Chinese companies may use Vietnam as a transit point for exports to the United States in order to avoid tariff penalties. Trump himself has repeatedly mentioned that Vietnam is a bad “evil” and even claims that Vietnam uses the United States worse than China.
From the above-mentioned signs, after the US-China trade tensions have temporarily eased, the Trump administration will also target other countries. This will leave Trump with a different external non-military “battlefield” in his company’s optional battle for the moment when he lost the Chinese arrow target, giving him an extra hand to externalize the internal problems of the United States; at the same time, it is also in line with him The anti-globalization and anti-free trade tactics of the 2016 elections are exactly the same. In the final analysis, all policy goals, big or small, are not as important to Trump as their domestic politics.
