US-China trade war negotiators continue to wrestle with how to make deal stick

Finding a way to ensure China delivers on any promises it makes in reaching a trade deal with the United States has been one of the biggest hurdles for negotiators in Washington and the matter remains unresolved, according to sources familiar with the talks. For its part, Beijing is adamantly opposed to any mechanism that gives Washington unilateral authority to decide whether it has satisfied its commitments, the sources said. However, US President Donald Trump has long criticised the World Trade Organisation for failing to hold China to account for not opening up its economy as promised when it joined the group in 2001. Washington has also accused Beijing of breaking an agreement made in 2015 between Chinese President Xi Jinping and then US president Barack Obama to curb cyberespionage. Despite their differences, Wang Heng, an associate professor specialising in trade agreements and economic law at the University of New South Wales in Sydney, suggested two mechanisms for dispute resolution that could satisfy both sides. One option is to establish a joint committee comprising government officials from the two countries. “It is a bilateral negotiation,” he said. But a better solution for both sides, he contended, is an adjudicator panel. Although similar to the first option, it would comprise independent lawyers and legal experts from China and the US, and have a more transparent method of operating. Trade negotiators tussle over enforcement issues during ‘very productive talks’ “Having a panel of adjudicators would be better for China as it helps to reduce the political cost of dispute settlement, and there is the possibility to have more transparency and consistency,” he said. “Such a rules-based mechanism will be more predictable in the long run, while the first [joint committee] solution may be difficult to predict [in terms of effectiveness] because it depends on the bargaining power of both sides.” The second option also offered benefits to the US, as “issues are resolved under the international rule of law”, Wang said, adding that similar arrangements had been made in the past, including among the 11 member nations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Zhang Yansheng, a chief research fellow at the China Centre for International Economic Exchanges in Beijing, said that while it was likely the two sides would start by setting up task forces to follow up on agreements made in the trade deal, that would only be a short-term solution. “A bilateral mechanism with no third-party adjudicator and only one side accusing the other? How could this be fair?” he said. “So even if they reach a deal, it will not last long. The US will soon point fingers at China and accuse it of not honouring the deal, so a new round of bilateral negotiations will have to start.” US and Chinese officials say a trade war deal is ‘extremely’ likely The trade war, Zhang said, has never been just about deficits and disputes, but is “a competition between two world powers”. “The trade dispute between the US and China cannot be solved,” he said. “There will just be a point when both countries realise they are not bigger than the other and cannot win over one another, and then they will move to cooperation.” At that point, exchanges between US and Chinese task forces and trade negotiators would become more frequent and that would help foster understanding and closer economic ties, Zhang said. Sheng Liugang, director of the trade and development research programme at the Chinese University of Hong Kong, agreed that bilateral task forces were the best way for the US to monitor China’s progress in honouring a trade deal. “Even if the US thinks China hasn’t fulfilled its promises and takes punitive action, they will still be dealing with China across the negotiating table,” he said. “But some work can still be done through the WTO in areas like intellectual property protection and alleged hacking.” China, US will ‘redouble efforts and speed up’ trade talks, Liu He says Sheng said that whatever deal is reached the US has not given up its option to impose unilateral tariffs on China if it fails to meet the agreed terms. “Trump has postponed the next round of tariffs, but he has not withdrawn them and is not likely to do so,” he said. Since last year, Washington has levied tariffs on US$250 billion worth of Chinese goods, while Beijing has retaliated with duties on US$110 billion of US imports. Trump had threatened to raise the tariff on US$200 billion of Chinese goods to 25 per cent from 10 per cent after March 1, but that deadline has now been put on hold.