Todd Bishop
After the negotiations in Shanghai at the end of July, the China-US trade war continued to heat up: in August, China-US trade was constantly sparking. US President Trump said on Friday (August 9) that the United States will not do business with China’s telecommunications equipment manufacturer Huawei at this stage, and that the raw materials will be poured into the China-US negotiations in Washington in early September. If it is not possible, it will be “very good.”
If the United States first calculated the 25% tariff on Chinese goods valued at 34 billion U.S. dollars on July 6 last year, the tariff war has been opened for more than 13 months. Now that the United States has imposed a 25% tariff on Chinese goods worth US$250 billion, it has also restricted the exchanges between the two companies. China has also applied tariff retaliation to US$110 million worth of US goods. Compared with this year and the first half of last year, China’s exports to the United States decreased by 12%, and US exports to China decreased by 19%. China was chased by Mexico and Canada and became the third largest trading partner of the United States, while the ASEAN countries’ total The trade volume has also surpassed the United States. It can be seen that the trade relations between the two sides are gradually drifting away.
At this point, the chips of both sides have been used almost. China’s suspension of agricultural products has forced Trump to continue to send money to farmers, but it is only back to the situation before the G20 “Site Conference” in Osaka at the end of June. The US “currency control country” label was originally used only to bring the targeted country to the negotiating table, although the US president has the right to ban its overseas development investment institutions from financing the country and refuses to participate in the US government procurement project. However, China, already at the negotiating table, has very little demand for this. Trump’s new tariff threat is a “double-edged sword”. It is a consumer product that goes from electronics, mobile phones to clothing. Although it can put pressure on China’s export manufacturing industry, it will first cause losses to American consumers.
China-US negotiations have undergone qualitative changes
In contrast to the semi-annual negotiation process after the Argentine Chamber of Commerce in December last year, the two sides talked about China’s so-called “structural” reforms in exchange for the US to cancel all additional tariffs. In the later stages of the negotiations, US Trade Representative Robert Lighthizer had almost only the final difficulty of the agreement “execution mechanism.”
However, since Trump added tariffs in May this year to break the negotiations, and after the Osaka Sci-tech meeting restarted the new negotiations, the two sides have rarely mentioned structural reforms. Instead, they talked about China’s repurchase of agricultural products in exchange for the lifting of the US ban. Specific local issues such as Huawei. Compared with this before and after, it can be seen that China-US trade negotiations have undergone qualitative changes.
At first, Trump relied on the strength of the United States to cope with the “28-year slowest” figure of China’s economic growth of 6.6% in 2018. He thought that the speedy talks could be completed and the 90-day deadline was negotiated. However, when the representatives of the two sides negotiated in a series of months to negotiate details of various agreements, the divergent differences will gradually emerge.
On Trump’s most concerned trade deficit with China, the US intends to ask China to buy more US$200 billion of US goods by the end of 2020. At the same time, the United States has refused to revoke additional tariffs on China once, and even asked China to cancel High-tech industrial subsidies, the elimination of tariffs on the United States, and promise not to retaliate against future US actions. Such a request was not only practically difficult to implement, but also completely stepped on the bottom line of the principle issue of the Chinese side, which led to the breakdown of trade negotiations in early May.
Later, the US imposed pressure on tariffs and even banned the “trick” for Huawei’s technology exports. However, China continued to maintain its position and issued a white paper on “China’s position on China-US economic and trade consultations” on June 2. Systematically recapitulate existing positions. Although the US expressed disappointment with the white paper, it also pointed out that China incorrectly stated the negotiation process. However, Trump seems to understand that it is impossible to succeed in one fell swoop. Therefore, he repeatedly asked Chinese President Xi Jinping to attend the G20 summit in Osaka at the end of June. The seminar was held as the basis for restarting the negotiations.
After the Osaka Special Olympics, Trump only mentioned the negotiation, and specifically pointed out two major issues of the new negotiations – China repurchased US agricultural products, and the United States lifted the ban on Huawei – and stressed that “the quality of negotiations is more important to me than speed. many”. After comparing the Argentine Chamber of Commerce last year, Trump asked for an agreement within 90 days to “solve many things that we all know to be solved in the end.” The attitude has changed dramatically.
Today’s negotiations are not urgent to talk about big issues. Only from the exchange of conditions, we can see that the two sides have a deeper understanding of each other’s positions. However, Trump is approaching the 2020 election, and in order to help him stabilize the agricultural state elections, he will also use the threats such as tariffs as bargaining chips. I believe that in the foreseeable future, the confrontation and pressure that you come to me in this detail will become the new normal of negotiation.
Structural contradictions cannot be resolved
In fact, the so-called “trade war” between China and the United States is rooted in the structural contradictions of the political and economic systems of the two countries. It must not be resolved only through simple conditions exchange.
From the Japanese-American political scientist Francis Fukuyama in 1992, The End of History and the Last Man, the universalization of liberal democracies will be the evolution of human society. After the end of the world, the development of China in the past three decades has gradually proved that this set of historical conclusions is irrational, and the United States is the first to bear the brunt of this system.
The most obvious challenge from China is the rapid increase in labor productivity. Since the 1990s, it has recorded more than 10% annual growth. At the same time, the rise of such productivity is not only due to the transfer of intensive agricultural population to industry, but also from the development of its technology, such as the ranking of the world’s top 50 artificial intelligence patent applicants according to the Nihon Keizai Shimbun, China in the past three years. Beyond the United States, 19 companies are on the list, and the latter has only 12.
These facts are not challenges to the final conclusion of history. They are just the appearance of the rapid catch-up of emerging economies. The challenge lies in the set of political and economic systems behind these developments that are not liberal and democratic, but are regulated by the central government. For example, behind the development of artificial intelligence in China, there are industrial policies such as the “New Generation Artificial Intelligence Development Plan” promulgated by the State Council in 2017.
The results of such central regulation have brought major challenges to the free market logic. The latter believes that resources should be handed over to individuals and businesses, so that they can freely move their own ways in order to use resources to the most effective places and achieve the best overall results – so when you see the economic downturn, relaxing the money will become the main Way out. However, China’s industrial policy is based on the central government’s review of the current situation and the future situation, advocating a certain selected road, and actively supporting the implementation of the plan, and even if the results cannot be said to be superior to the results of the free market, It can also be divided equally with autumn.
Even in his 2018 visit, Lian Fushan had to admit that “the only viable systemic opponent of the liberal democratic system” is the Chinese model. He said: “If the Chinese economy is bigger than the United States and the Chinese are richer in the next 30 years, and China still exists, I will think that they really have good arguments.” The style of “practice is the sole criterion for testing truth” is very different from the absoluteism of the final conclusion of history.
However, economic liberalism seems to remain the mainstream in the US trade policy think tank, and it has become more and more fundamentally absolutist. Otherwise, the structural reform requirements such as stopping industrial subsidies will not be the focus of trade negotiations. However, if the industrial development of central regulation will eventually be defeated by the development of free markets, why not let the two systems compete?
It is not appropriate to be too pessimistic at the negotiation table.
The structural contradiction between China and the United States can be regarded as a major change that has not been seen in history. It is confined to the US, the Soviet Union and the hegemony of military, geopolitical, and ideological periods during the Cold War, and extends to the competition of economic strength. Therefore, from the foreign policy such as Foreign Policy to The Economist, there have been comments in the past year that China and the United States are gradually split in the economic, social, scientific and technological fields, and will bring the world into a world. In the new cold war, countries cannot afford to stand by.
However, such fears may be excessively pessimistic. We live in a highly globalized era today, unlike the era when the world entered the Cold War after World War II: today’s value of exports accounts for nearly a quarter of the world’s economic output, six times higher than at the end of World War II. The real value of total exports has increased by 30 times.
According to estimates by the Organization for Economic Co-operation and Development (OECD), 70% of global trade is closely linked to global value chains, and the foreign added value of a country’s exports itself has risen from 20% in 1990 to nearly 30%. Under these worlds, no one will be willing to see the world divide into a cold war situation.
The contradiction between China and the United States is wide and deep. There has not been a clear solution to this problem, and the trade war between the two sides has gradually become normal, and it is more likely to expand to the vicious competition at the scientific and technological level. However, these conflicts are also incompetent. Avoiding is an inevitable historical stage of bilateral relations. Now the two sides have resorted to the contradiction at the negotiating table “the war without smoke” and there is no threat of interaction. This rational choice itself is worthy of our optimism and expectation when the deadlock between the two sides is difficult.
