Beijing stays silent on new US trade deal with Mexico and Canada

Government and official media have yet to comment on the agreement, which has a provision widely seen as an attempt to hem in China

PUBLISHED : Thursday, 04 October, 2018, 8:03pm
UPDATED : Thursday, 04 October, 2018, 8:03pm

The Chinese government and its official media have remained silent on the new trade deal agreed between the US, Canada and Mexico this week, even though the pact is widely seen as a potential threat to China’s future position in the global trading system.

Since the US-Mexico-Canada (USMCA) Agreement was made on Sunday – on the eve of China’s week-long National Day break – the foreign and commerce ministries in Beijing have not released any comment on the deal, which could help Washington in its escalating trade war with China.

The agreement, a revision and update to replace the North America Free Trade Agreement, includes a special clause empowering the US to review or effectively reject any free-trade deal that Canada or Mexico might make with a “non-market economy”. That stipulation is seen by analysts as targeting Beijing since China continues to be designated a non-market economy by both the United States and the European Union.

US National Economic Council director Larry Kudlow made the point directly in an interview with Fox News on Tuesday, saying the USMCA, along with ongoing US trade talks with the EU and Japan, would give Washington “pretty much a united front among the major allies” in dealing with China.

“I’ve always felt that this would be a trade coalition of the willing … to send a message to China that they’ve got to shape up and start behaving like a citizen in the new world of trading,” Kudlow said. “I think we’re greatly strengthened by this [USMCA].

“We are sending China a message, and I hope they are listening,” he said.

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Compared to the widespread news and analysis of the deal in North America – with US President Donald Trump tweeting that the deal was a “historic transition” from the past and “a great deal for all three countries” – China has kept domestic media coverage and public discussion of the USMCA to a minimum.

The Washington bureau of China’s state news agency Xinhua reported the agreement on Sunday and published a follow-up story on Monday under a headline warning that it could still be rejected by the US Congress. Communist Party mouthpiece People’s Daily printed nothing at all about the USMCA. China’s other state media outlets all avoided analysing the possible impact of the deal on China.

Global Times – the nationalist tabloid backed by People’s Daily that has been vocal on the US position in the trade war – stayed silent on the USMCA deal, while most major internet portals, which have been pressured by censors to toe the party line in covering the trade war, were also quiet about its implications for China.

The only report that mentioned the risk the USMCA posed to China was on the finance channel of internet news portal Sohu.com, and was sourced from a social media account. The story on Wednesday carried a headline saying the new deal will “add significant pressure on China in trade talks”.

Beijing’s silence on the agreement could be explained in part by this week’s national holiday. It may also be due to Beijing’s efforts to play down the trade confrontation with Washington.

Wang Heng, co-director of UNSW Law’s China International Business and Economic Law initiative in Sydney, said it was more about China wanting to “cool down” its comments to avoid worsening the trade war with the US. While Beijing and Washington have called off all official trade negotiations for now, the two sides could restart talks down the road, he said.

“The US has influence over Canada and Mexico, and China can’t change that,” Wang said. “China has to take a wait-and-see approach” on the implications of the USMCA deal.

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An opinion piece run by Xinhua on Thursday did not mention the USMCA, but repeated that China must rely on itself for development, echoing President Xi Jinping’s comments last week.

“Unilateralism and trade protectionism are rising, and relying heavily on foreign countries will not only erode the foundation of [Chinese] development but also endanger national security,” the opinion piece said. “History has told us to rely on ourselves and it is the inevitable choice for China to stand up and become stronger.”

The Chinese government published a 36,000-word white paper last week, detailing Beijing’s trade war stance. In the white paper, China blamed the US for causing the trade war and defended its own trade practices. It also said China was the protector of a multilateral trade system centred on the World Trade Organisation.

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Robert Carnell, head of research for the Asia-Pacific at ING, said the US was acting like the European Union by not allowing members to go outside the group and set up their own free-trade deals.

But he added that neither Mexico nor Canada had plans to draft a free-trade agreement with China in the near future, which would make Beijing’s silence “reasonable”.

“In some respects, China’s silence could simply be not drawing attention to something, which isn’t really likely to be a binding constraint on their behaviour in the near term. It would fit in with my general sense that China’s approach to what’s going on at the moment has very much been damage limitation,” Carnell said.

“There is no real upside to China in responding. There is, however, considerable downside. In the meantime, of course, China is going ahead with all sorts of trade opening measures of its own, which are eminently sensible.”