US-China trade talks round 3: pilfering allies’ piece of the Chinese pie
Washington is pressuring Beijing to enter into long-term contracts that would take Chinese business away from friends in the EU and Australia
When US Commerce Secretary Wilbur Ross gets to Beijing this week, he will have a much more clearly defined goal than was the case on his last trip. After disappointment characterized that first round of trade talks aimed at averting an all-out tariff battle, a visit to Washington by a high-level Chinese delegation two weeks ago appeared to break new ground with a joint statement that hinted at movement toward a deal.
Details have been slowly materializing, with reports suggesting that the Trump administration is angling to squeeze large, multi-year contracts for agricultural and energy exports out of China, in hopes of narrowing America’s massive trade deficit with its largest trading partner.
Setting aside for a moment the futility of focusing on bilateral trade deficits, which economists widely agree is influenced more by domestic economic policy than by trade policy, one can at least comprehend the strategy of asking China to buy more of something that they need.
But if China is to buy significantly more US exports in these areas, it will have to come at the expense of others, as The Australian Financial Review noted on Monday.
“…the move could mean taking Chinese business away from key US allies such the EU, Australia, Brazil and Argentina, whose exports could be hit by President Donald Trump’s gambit,” AFR wrote.
The focus on long-term, product-specific deals aims to insulate any agreement from future tensions.
“China, [people familiar with the discussions] say, would be less able to cancel purchases if it objected to comments by Mr Trump on sensitive subjects such as Taiwan. In the US, the move is intended to show Mr Trump is securing long-term results.”
While the Trump administration has declared that they will hold off on proposed tariffs in the meantime, any deal could still take time to hammer out. If the deal comes with the scaling back of penalties slapped on Chinese telecoms giant ZTE and fails to address structural issues related to intellectual property theft, it will likely also face bipartisan criticism in the US. But momentum appears to be building fast for a settlement.