China faces challenge by US to legitimate development goals

The latest trade talks have exposed the yawning gulf in positions between Beijing and Washington, and compromise may prove difficult to reach

PUBLISHED : Wednesday, 09 May, 2018, 1:32am
UPDATED : Wednesday, 09 May, 2018, 1:34am

Before the first round of Sino-US talks attempting to head off a looming trade war, Chinese officials declared there would be no compromise on the country’s fundamental interests.

That anticipated unacceptable demands from the Americans, and differences between the two sides appear irreconcilable. On reflection, expectations of a breakthrough may have been unrealistic.

Analysts said the opening round served only to communicate each side’s position and draw the lines for negotiation. Evidence of that is news that Vice-Premier Liu He, the top economic adviser to President Xi Jinping, will visit Washington as early as next week to resume talks.

The agendas unveiled by the two sides illustrate the yawning gulf they must bridge.

The US position in particular defied reason and rationality, both economically and diplomatically. It looked more like an ambit claim than one to be taken seriously. That said, the two sides did not rule out compromise, which is the only way forward if the world is to avoid a damaging trade war.

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Xinhua reported they had agreed to maintain close communication and create “relevant working mechanisms” to address the issues. They will need every tool available.

From Beijing’s point of view the American demands touch on the fundamentals of China’s legitimate aspirations for development. They include lopping US$200 billion off the trade deficit and halting subsidies for industries under the “Made in China 2025” plan to guide the country’s modernisation and make it more technologically self-sufficient, calling on the United States to cease an investigation into China’s trade and industrial policies, and lifting curbs on hi-tech exports to China.

Equally, from the US side, the talks were about protecting its interests. Indeed, ultimately it is core national interests that are at stake. So the difficulties ahead should not be underestimated.

Relatively speaking, reducing the trade deficit to some extent is easy, short of impacting seriously on employment in China’s export industries.

But opposition to the “Made in China 2025” industrial plan goes to what appears to be the real issue for some on the US side – how to restrict China’s rise.

Chinese Vice-Premier Liu He to go to Washington to continue talks to avert a trade war

Behind the rhetoric and distrust of Washington’s motives, US President Donald Trump has gone out of his way to highlight a good relationship with Xi. It is a reminder that after all, Trump is a deal maker.

Observers see two positive political factors. One is that Trump has personally focused on narrowing the headline deficit rather than industrial policy. The other is that he is facing midterm elections later this year in which his party will defend control of both houses of Congress. A deal that could be cited as a foreign and trade policy achievement would do no harm to its chances.