Possible direction of the U.S.-China trade dialogue after a trial run

On May 26, U.S. Trade Representative Dyche spoke with Chinese Vice Premier Liu He, and after the first round of probing, each side also revealed its next step. Whether the U.S.-China trade war will continue to be prolonged is undoubtedly another barometer of Sino-U.S. relations.

The core issue of U.S.-China trade continues to be unresolved

A statement from the Office of the U.S. Trade Representative said only that the two sides had an “introductory online meeting to discuss the importance of the trade relationship between the United States and China” and that “Dyche presented the guiding principles of the Biden-Harris Administration’s worker-centric trade policy and her views on the U.S.-China trade relationship under review, while also raising concerns. views, while also raising concerns.”

In line with Biden’s previous repeated requests to encourage the purchase of American goods, Dyche is supposedly being more explicitly “guided by worker-centric trade policy principles,” which are not really different from those of the former Trump administration. Although the statement does not detail the “issues of concern,” it could conceivably still be the Communist Party’s export subsidies, trade and market access barriers, theft of intellectual property, and forced technology transfer. All of these elements were included in the first phase of the U.S.-China trade agreement, which the Chinese Communist Party did not intend to implement.

The high tariffs imposed on Chinese imports by the former Trump administration served as an effective lever in the trade war, and the new U.S. administration has not abandoned this lever for now. The reason why the Chinese Communist Party is still willing to continue trade negotiations is that it hopes to take this opportunity to ease U.S.-China relations, on the other hand, it mainly hopes to eliminate these tariffs as soon as possible to further expand the U.S. market, which is probably not feasible in the internal cycle of the Chinese economy.

On January 15, 2020, China and the United States signed the first phase of the trade agreement. At that time, 25% tariffs had been imposed on $250 billion of Chinese exports to the United States; another $112 billion of goods, 15% tariffs had been imposed; and Trump issued an ultimatum that if an agreement could not be reached, 15% tariffs would also be imposed on the remaining approximately $156 billion of goods, and 25% tariffs on $250 billion of goods could be increased to 30%. The CCP was forced to sign the first phase of the trade agreement, but only Liu He signed it on behalf of Xi Jinping, who did not appear, and Trump reduced the 15% tariff on $112 billion of goods to 7.5%.

The agreement stipulates, basically, that the CCP is required to gradually abandon export subsidies, relax trade and market access barriers, stop stealing intellectual property and forced technology transfers, etc. In addition, China added $200 billion in U.S. goods purchases over 2 years to balance the U.S.-China trade deficit. The agreement provides for inspection and monitoring mechanisms, and it is still largely up to the CCP to decide whether the tariffs will be adjusted upward or downward in earnest.

More than 1 year has passed, but the Chinese Communist Party has apparently not fulfilled the agreement. The new U.S. government has not lowered tariffs or imposed further tariff increases so far, and the U.S.-China trade issue remains unresolved. The CCP should be eager to tear up the agreement, but instead of improving relations between the US and China as expected, they are at an impasse again, and the CCP is afraid to take the easy way out.

The Chinese Communist Party is still misjudging at the top

The Ministry of Commerce’s statement was also brief, saying only that “both sides had frank, pragmatic and constructive exchanges in a spirit of equality and mutual respect. Xinhua News Agency first quoted the content of the Ministry of Commerce’s brief report, and then issued an opinion piece, “What is the message of the latest U.S.-China call? which was described as “the first high-level communication between the U.S. and China in the field of economic and trade since the Biden administration took office.

The article acknowledged that “U.S.-China relations have encountered serious difficulties unprecedented since the establishment of diplomatic relations between the two countries” and that “high-level exchanges between China and the United States in different fields have stalled or even come to a halt, and the economic and trade field is no exception,” but added that ” Economic and trade cooperation remains a relatively stable area between China and the U.S., and is very important for normalizing relations between China and the U.S. and ensuring that China-U.S. relations do not go off the rails or cross the red line.”

It is clear that the Chinese Communist Party attaches great importance to this call, and the top echelon of the Communist Party is looking forward to a breakthrough in Sino-US relations. The article also said, “The two sides have highly complementary economic and trade structures and great potential for cooperation.”

While the CCP deliberately exaggerates the potential for U.S.-China economic and trade cooperation, the reality is that many of the supply chains of U.S. suppliers previously in mainland China are still in operation, especially for labor-intensive, low-value small commodities, which the U.S. will not completely rebuild within its borders, but is moving from mainland China to other Asian and American countries. How long the CCP’s so-called “complementarities” will last and how large they will remain will depend on how hard the U.S. moves its supply chains and how long the technology sanctions will last. The U.S., Japan, India and Australia are building vaccine and epidemic prevention supply chains, the U.S. and Japan are preparing to build 5G and technology supply chains, the U.S. and Taiwan are rearranging chip supply chains, and the U.S. and South Korea are strengthening cooperation.

The Xinhua News Agency’s article, wishfully interpreting itself, said that “the two sides have a high degree of consensus on the issue of economic and trade remaining the ballast of Sino-US relations,” and again spoke highly of the first phase of the Sino-US trade agreement, calling it “a link that maintains the ties between China and the US and plays an important role in holding up the bottom “. The article even quoted President Joe Biden’s speech on Feb. 4 that “the United States is also ready to work with China when it is in the interest of the United States.”

After botching the Alaska diplomatic talks, the Chinese Communist Party is eagerly seeking opportunities for dialogue with the U.S., but is still unwilling to put its foot down. According to the article, “Breaking through the situation at hand requires a deeper understanding between China and the United States of each other’s strengths and intentions” and “Many years ago, China and the United States quarreled, fought, and at one point confronted each other bitterly, and after trying every way to get along except for cooperation, China and the United States finally chose to seek common ground while preserving differences After trying every way to get along except cooperation, China and the United States finally chose to seek common ground while preserving differences.”

The top echelon of the Chinese Communist Party is still under the misapprehension that it has the strength to be on an equal footing with the United States and that the United States will eventually give in. On May 26, however, Kurt Campbell, head of Indo-Pacific affairs at the National Security Council, said that “the period known as ‘broad engagement’ is over” and that U.S. policy toward the CCP will now be based on “U.S. policy toward the Communist Party will now operate under “a new set of strategic parameters” and “the primary approach will be competitive. not very interested in the economy.” He even said, “Our goal is to make sure that this is a stable, peaceful competition that shows the best of America. Some elements of the Cold War had prompted us to accelerate innovation to better accomplish our mission, and we want to do the same now.”

It is not clear whether Campbell’s words will wake up the still-misjudging top brass of the Chinese Communist Party, but in response to this, Chinese Foreign Ministry spokesman Zhao Lijian continued with the old refrain that “China and the United States, as two great powers,” “share a wide range of common interests,” on May 27 “It is totally wrong to define or dominate Sino-U.S. relations by ‘competition'”, and the U.S. side should “move in the same direction as the Chinese side”.

From their respective statements and claims, it seems that the top level of the CCP is still stuck in the past, and Xi Jinping’s repeated references to the “hundred-year big change” are constantly screwed up with the actual international situation, which is the most fundamental reason for the CCP’s isolation.

Trade War Fears Continuation

The Chinese Communist Party is still trying to play the game with the United States in the same old way. Xinhua News Agency issued a third article on May 27, “Ministry of Commerce: China and U.S. should work together to promote the implementation of the first phase of economic and trade agreements,” quoting Ministry of Commerce spokesman Gao Feng as saying, “The first phase of economic and trade agreements between China and the U.S. will benefit China, the U.S. and the whole world. Both sides should work together to create an atmosphere and conditions to promote the implementation of the agreement.”

Whether or not the agreement is implemented depends on what the Chinese Communist Party does, and the U.S. is mainly monitoring it. By deliberately saying that “both sides should work together,” the Chinese Communist Party is actually implying that if the new U.S. administration does not make concessions on all fronts, the Chinese Communist Party will still not implement the agreement. I believe the U.S. government should have caught such a signal.

At the press conference of the Ministry of Commerce, another reporter asked: “The European Parliament has announced a freeze on the discussion of the China-EU Investment Agreement, how does the Ministry of Commerce evaluate the impact on the future of China-EU economic and trade cooperation? Also will the opening commitments made by the Chinese side in the agreement be suspended as a result?” Spokesman Summit completely avoided whether the commitments would be kept. Both the US or the EU should have a better idea of the CCP’s tricks.

Whether Liu He is replaced or not, the outlines of the US-China trade dialogue or the future of trade between China and Europe are roughly clear. The CCP’s desire to use trade as a bargaining chip to continue to play with the U.S. and the West is also almost certain to continue and expand the U.S.-China trade war, and perhaps the China-EU trade war. Beyond tariffs and technology sanctions, I fear there are more fronts intertwined, and all-round confrontation is inevitable.