China leaves door open for trade war talks but not with American ‘knife at its throat’

Chinese officials say the United States must treat it as an equal and keep its word on agreements

PUBLISHED : Tuesday, 25 September, 2018, 3:23pm
UPDATED : Tuesday, 25 September, 2018, 11:35pm

The door for renewed high-level trade talks between Beijing and Washington is still open but China will not agree to proceed with a “knife at its throat”, Wang Shouwen, the vice-minister of commerce who led the Chinese delegation to Washington for the last round of trade talks in August, said on Tuesday.

China has referred to US tariffs as a knife at its throat since the first levies were imposed in July. While Wang and seven other top officials briefing the media on Monday’s “white paper” did not say directly that the United States would have to remove all tariffs before any new trade talks, that condition seemed to be implied.

The white paper is the country’s most comprehensive statement of its trade war stance to date and came as new tit-for-tat tariffs came into effect.

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In it, China accused Washington of “bullying” tactics and economic “intimidation”, while underlining its own position that only cooperation on trade issues would produce results. Beijing continued to try to occupy the moral high ground on the trade issue and globalisation in general while portraying the US as the economic aggressor and China as the undeserving victim.

Wang said new talks to resolve the trade dispute could take place if the US treated China as an equal and kept its word to abide by any agreements.

“China and the US have held four rounds of high-level talks. Many agreements were made, and the two sides even filed a joint statement,” he said, referring to talks in May when it appeared briefly that a framework for avoiding a trade war had been worked out.

“But the US side turned the tables, abandoned those agreements and slapped restrictive trade measures [on Chinese imports], making it impossible to proceed with further talks.”

On Saturday, Beijing turned down an invitation from Washington for another round of trade talks this month after US President Donald Trump ordered the imposition of tariffs on an additional US$200 billion in Chinese imports. Those tariffs took effect on Monday, with China retaliating with tariffs on US$60 billion of US goods.

On Tuesday, Wang and the other officials played down the trade war’s threat to China, but warned that the global economy would be the biggest victim of Washington’s trade policies.

“[The trade war] has cut off connections between industries in different sectors, risking fragmentation of global supply chains,” said Luo Wen, vice-minister of the Ministry of Industry and Information Technology.

“US unilateralism and protectionism has caused many countries to retaliate … The main US trading partners like China, the European Union, Canada and Mexico have joined in retaliating. We can say that the risks of a global trade war have risen significantly.”

But China was able to compensate for the economic impact of the trade war at home, mainly by boosting domestic demand and improving the environment for private businesses, the officials said.

Lian Weiliang, a deputy chairman of the National Development and Reform Commission, admitted that the tariffs would “have direct and indirect impacts on China’s economy, and they will be quite serious on certain industries and regions”.

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“To improve the ability of companies to adapt, China will further reduce their [social insurance] fees and taxes,” Lian said.

He said the central government had effectively employed similar measures when overseas demand fell sharply, shrinking China’s exports by 8 per cent in 2015 and 6.8 per cent in 2016.

Chinese analysts said the US must not raise current tariff rates or impose new sanctions if there was to be any hope for new negotiations in the near term. In the absence of that, the US was unlikely to come back to the bargaining table until the trade tariffs had taken a toll on the US economy, they said.

The least that Washington could do to show its willingness to engage in further talks would be to avoid raising the rate of the tariff placed on US$200 billion of Chinese imports on Monday from the 10 per cent to 25 per cent on January 1 next year, as currently scheduled and also to not impose punitive tariffs on a further US$267 billion of Chinese goods as Trump has threatened, according to Shi Yinhong, a Sino-US relations specialist with Beijing’s Renmin University.

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“It would be a test of kindness whether Washington does these two things. I believe the Chinese government would take them into consideration as important factors in their decision-making,” said Shi, an advisor of the State Council, China’s cabinet.

“The trade dispute is obviously very difficult to solve, but it must be handled in a diplomatic way.

“Confrontation over trade issues will hang over Sino-US relations in the long term, and a truce wouldn’t be probable until the beginning of next year,” Shi predicted. “And any truce, which China would want to be a lasting one, would likely to be only a short one, judging by the moves [recently] by the Trump Administration.”

Lu Xiang, a US expert with the Chinese Academy of Social Sciences, a think tank affiliated with the central government, predicted Washington would only soften its stance when the US economy started to suffer from the trade tariffs.

“They need to feel the pain in the US economy first, but right now the US stock market seems to be doing pretty well and economic growth seems steady,” he said.

“I believe the two sides are still communicating through lower-level channels, so if the US shows a willingness for talks, those signals could get through.”