Trump trip is an opportunity to ease US-China trade irritants
US President Donald Trump’s first state visit to China is supposed to be a historic opportunity for both countries to tackle problems that bedevil bilateral ties. The visit is also seen as a chance to deepen long-term trust and cooperation between the world’s two largest economies.
In addition to security issues, trade and economic cooperation will be a crucial topic during Trump’s visit, which began Wednesday. Whether Trump will seek to reduce friction regarding the US-China trade imbalance and intellectual property rights remains an open question.
The economic and trade relationship between China and the US has never been so important and intertwined. Unfortunately, along with expanding bilateral economic ties, the imbalance in US-China trade has continued to grow. Accordingly, the relationship has become more contentious, with both countries disagreeing on what rules should govern access to their respective economies.
After taking office, Trump moved to reverse the course of free trade by withdrawing the US from the Trans-Pacific Partnership and threatening trade wars. He also pulled the US out of the 2015 Paris climate accord, pledging instead to revitalize his country’s coal industry.
US accuses China of discriminatory tactics
The Trump administration recently complained that China has launched new programs that pose significant challenges for foreign firms doing business in China. Specifically, those programs are intended to help Chinese firms compete with foreign firms through a range of discriminatory tactics, and eventually either expel Western firms, restrict them to a relatively small share of the domestic market or compete with them in international markets. This summer the Trump administration began a trade investigation alleging Chinese theft of intellectual property and limiting market access for high-tech goods.
A delegation of CEOs from 29 large American companies is accompanying Trump in China, a move to counter growing efforts by other Western powers such as Germany, France, and Britain to promote their firms in China. Prominent technology and financial companies are mostly absent from the delegation, while agribusiness and energy firms dominate, including Cheniere Energy (an exporter of American shale gas), Archer Daniels Midland (one of the world’s largest food processing and commodities trading companies), DowDuPont (a chemicals and agribusiness giant), and Freepoint Commodities (a global energy and agriculture products trading company).
This underscores the US ambition to sell more gas and commodities to China. But it also hints at a lack of interest in resolving trade disputes or achieving long-term political solutions to trade issues, especially financial access and intellectual-property protection.
Tweetable, short-term ‘immediate results’ likely
What seems to interest Trump is a series of tweetable short-term “immediate results” and “tangible agreements,” which satisfies his “America First” agenda of confronting Beijing over unfair trade practices and bringing jobs and investment home. China is likely to oblige by announcing big deals to buy American goods and so allow the president to boast of a big success when he returns home.
This would leave critical issues unaddressed, risking ultimately in moving the US-China relationship from competition to direct confrontation. It’s reasonable to expect that a trade storm will occur after Trump’s visit.
In May China agreed to grant limited US access to financial services aimed at reducing China’s trade surplus with the US which reached US$347 billion last year. With its national program of “Made in China 2025,” China is investing huge financial resources to raise its technological prowess and industrial innovation.
It’s working hard to become a global leader in green manufacturing and other technologies such as high-speed transportation, medical devices, robotics and space travel. China has developed its own intellectual property rights that might benefit the US, so the bi-directional flow of technology can only help both countries.
If Trump could show that the US stands ready to partner with China to address mutual difficulties, improve trade ties and aim for ambitious growth in US trade and investment with China during the next five years, then his visit will go a long way toward boosting continued economic prosperity for both countries.