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Sino-US relations

Trump’s China stance unchanged despite trade deal, says economist

A senior US economist has warned that without a formalised stable economic relation, trade deals made in each side’s favour could change the status quo when the agreements fall short of expectations

PUBLISHED : Tuesday, 23 May, 2017, 8:01pm
UPDATED : Tuesday, 23 May, 2017, 10:35pm

China and the United States have yet to form a stable economic relation, but making deals in their respective favours could change the status quo when the agreements fall short of expectations or when the spotlight on the trade deficit returns in the run-up to the midterm election, a senior US economist warned.

“I don’t think the [US] President’s China policy has totally changed,” said Derek Scissors, a resident scholar of the Washington DC-based think tank American Enterprise Institute. “This is a temporary shift.”

Donald Trump’s campaign promises – including a 45 per cent tariff on all Chinese goods and labelling the country as a currency manipulator – allowed him to narrowly win the presidential election last November. But his attitude seems to have turned around after meeting with Chinese President Xi Jinping in Florida in early April. The two leaders agreed to a 100-day plan to deal with bilateral trade and investment issues.

Scissors warned that President Trump has a clear pattern of changing his minds frequently over everything, which is a way for him to rally support for immediate gains. A favour in return for his halt of actions would be China’s help in North Korea issues, which “may, or may not be realistic”.

Pressure from China, which is North Korea’s largest trade partner, has successfully pressured the Communist neighbour to give up nuclear tests last month, but tension remains with continuous missile tests.

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Although President Trump has appointed many China critics, including trade representative Robert Lighthizer and White House Trade Council chief Peter Navarro, his China team and China policies have not been formalised, creating uncertainties from the US side.

“There are many missing positions and no obvious candidates to fill them,” Scissors told the South China Morning Post in Beijing. “We don’t have the stability yet in the US administration and we really don’t have a sense of when we will get it.”

The two countries announced initial results from the 10-point trade deal in mid-May, which included China lifting its ban on American beef and liquefied natural gas, as well as facilitating safety reviews over genetically modified products. They will take effect on July 16, the 100th day of the Xi-Trump meeting, to honour their commitments.

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However, Scissors argued that the deals, despite bringing in billions of dollars worth of businesses for the United States, were minuscule compared with the US$300 billion trade deficit with China.

“What will keep the President happy with China is something much bigger than that, like progress on North Korea or follow-up commercial deals.”

At the bilateral talks to be held in Washington DC in July, China may announce more concessions in trade, a move that could bolster positive momentum ahead of the Chinese leadership reshuffle this autumn.

“Shopping trips can work, but won’t last long,” the US economist said.

He warned that the US has now become very impatient and wants immediate solutions, despite the fact that such changes may not be accomplished quickly.

Many in the US, not just President Trump and the Republicans, have been unsatisfied with China on various issues such as trade imbalances, in the past 15 years, Scissors said.

“You can’t fix 15 years in one year,” he stressed.

You can’t fix 15 years in one year
Derek Scissors, American Enterprise Institute

Chinese trade practice should be the No. 1 issue rather than the deficit, Scissors said. The headline figure is highlighted because Trump delivered such promises and he has to act to ease domestic pressure . “The President talked about it so much that if he doesn’t deliver improvement in the trade deficit, his China policy could be seen as a failure.”

China has demanded the import of high technology, which most Western countries halted exporting since the 1990s, to narrow the deficit instead of buying more Boeing air planes or soybeans. However, resumption is unlikely given the concern over the use in military buildup and the protection of intellectual property.

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The bilateral cooperation on a specific topic will buy some time to form a new relation, but the Trump administration is facing more pressure a year from now as voters will re-examine his campaign promises when the midterm election draws near.

“If the US economy doesn’t improve, I think the President will be forced to be more protectionist towards China,” Scissors said.

A good way, he suggested, is to ban Chinese firms stealing intellectual property, or to close off sectors related to national security, such as telecommunications.

However, the Trump administration may block Chinese imports on national security grounds, which is a politically easy but unwise move, and label China as a currency manipulator next year, Scissors said.

He said Trump ran a campaign critical of China, and he must now show results.