Divisions between Donald Trump and G7 allies on trade ‘won’t help China’s negotiations with US’

EU, Canada still expected to side with US in pushing Beijing to make reforms

PUBLISHED : Saturday, 09 June, 2018, 9:55pm
UPDATED : Saturday, 09 June, 2018, 11:29pm

Group of Seven members may be distracted with their own trade tussles at the moment, but Chinese analysts say divisions within the bloc will not give Beijing any advantage when it comes to negotiating with Washington.

US President Donald Trump has found himself battling with the rest of the group at the two-day G7 summit in Canada this weekend, after hitting some allies with tariffs. As well as the 25 per cent duty on steel and 10 per cent tariff on aluminium imported from the European Union and Canada, Trump has also called out leaders from Canada and France on Twitter for setting up trade barriers.

Across the Pacific, Chinese state media tried to play down the G7 summit while playing up the Shanghai Cooperation Organisation meeting that began in eastern China on Saturday. Led by China and Russia, a former G7 member, the regional security bloc also brings together leaders from India, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan and Uzbekistan.

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In an opinion piece on state-run on Friday, Renmin University academic John Ross called the Shanghai bloc “a bastion of global stability” – mainly because it had greater growth potential and covered a bigger proportion of the world’s population than the entire G7, whose members made a slow recovery from the 2008 financial crisis.

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Meanwhile state tabloid Global Times on Thursday was revelling in the latest rift within the G7 after a tense meeting of the bloc’s finance ministers wrapped up.

“The G7 summit on Friday and Saturday is bound to witness sparks flying,” the editorial said. “G7, the rich countries’ club which is supposed to better promote development of Western economies, is now all dog-eat-dog [world].”

While the tariff disputes within the G7, which covers about 40 per cent of global net worth, might result in China finding the EU and Canada on its side fighting against Trump’s protectionism, analysts said it would not give China a strong advantage in its trade negotiations with the US.

Wang Heng, a law professor specialising in US-China relations at the University of New South Wales in Sydney, said the EU and Canada tended to side with Washington when it came to pushing Beijing to carry out deeper reforms such as to its state industry policies and protecting intellectual property rights.

The EU, Canada and the US are opposed to granting China market economy status, as promised by the World Trade Organisation if Beijing met certain conditions within 15 years of joining the WTO in 2001.

“The tariffs are really just a matter of negotiation strategy,” Wang said. “Trump is battling on two fronts: on one side he is trying to get better deals from the US allies; but on China issues, he wants them to stand together [against China]. It’s easier for him to get a deal on China because other countries also share the same concern.”

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Analysts also said Trump’s unpredictability was a headache for other countries and it reduced the trade negotiations to a zero-sum game.

“Predicting US policy is a high-risk activity ... Trump’s unpredictability is his strategy. In military terms, Trump is trying to engage in mobile warfare to find a chance to win the battle through shock and disruption,” Lu Xiang, a US affairs specialist at the Chinese Academy of Social Sciences, said.

“China should not get too involved in these disputes – we should make our own Plan A, Plan B and Plan C and prepare ourselves for different scenarios.”

According to Wang, China has three options to tackle its trade disputes with the US: fight back with punitive tariffs, engage in talks and deal with disputes through the WTO, or carry out systemic reforms.

“Beijing really wants to go with the second option, because there is limited room for a tariff war with the US since its trade with China doesn’t account for a large proportion of America’s overall trade, and China depends on imports of hi-tech products from the US,” Wang said. “But the most effective of those options is the third one.”