Why US-China trade talks are failing to take off despite pressure from American business
- Trade is on the back-burner as the two sides cross swords over security, the hi-tech sector and ideology
- The real complication, however, is the lack of political motivation to push for substantial dialogue and China’s loss of hope in the US, say observers
The US business community has piled pressured on the White House to restart trade talks and adjust tariffs with China, but a lack of political motivation dims prospects for meaningful engagement between Beijing and Washington, observers say.
As part of the campaign, business groups have urged US economic chiefs to resume the process of tariff exemptions which expired at the end of last year, arguing that the punitive tariffs imposed on China in the trade war initiated by former US president Donald Trump are hurting US jobs.
In addition, more than 3,700 US companies have filed lawsuits since last year at the US Court of International Trade, asking to end and refund import tariffs on Chinese goods, according to US media reports in May.
But trade has dropped down the priority list in both Beijing and Washington, with relations centred on confrontations over security, the hi-tech sector and ideology.
As US-China friction grows, Beijing unleashes its fiery young diplomats
“There is acknowledgement in the US about the necessity to make adjustments to the tariffs under Section 301, but the real complication for Beijing and Washington is the lack of political motivation to push for substantial dialogue. There has not been even a ‘zero to one’ breakthrough in diplomatic engagement,” said Bo Zhengyuan, a partner with Plenum, a China-focused research firm based in Beijing.
“But, given the rising calls from the business side, it is likely that trade issues will be back on the radar over the short term.”
The trade war began in earnest in March 2018. Then president Trump announced punitive tariffs on Chinese products in the wake of a US Trade Representative report accusing China of unfair trade practices and state-backed theft of intellectual property, triggering tit-for-tat retaliation from Beijing.
However, China’s purchase has fallen behind target due to the pandemic. The dispute consultation mechanism, a key part of the trade deal which involves regular bottom-up communications from a daily to semi-annual basis, has largely failed to get rolling because of pandemic disruptions, the US presidential election and the subsequent transition of power.
Beijing has said that it will continue to implement the deal. But observers say the targets are set too high and it is clear to both sides that Beijing is unlikely to fully deliver on its purchase commitments.
US-China trade deal hits first anniversary with mistrust at ‘all-time high’
Some 30 major US business groups submitted a letter to Treasury Secretary Janet Yellen and Tai last week, stating that China had met “important benchmarks” in the trade deal and urging Washington to move on to issues untouched in phase one.
A US business source familiar with the trade negotiations said the phase one trade deal might fade away and end “without fireworks”.
“As long as we [China and the US] are not escalating things, we will just keep doing what we are doing,” the source said.
02:23
Gloves off at top-level US-China summit in Alaska with on-camera sparring
But the tariffs will remain – at least until the US midterm elections next year – and will only show some flexibility afterwards, he predicted.
Bo at Plenum said both sides would be waiting for the political climate to improve to enable senior-level dialogue on trade and the economy.
“It is possible that they could work out a solution at the end of the year, which may draw a conclusion on the phase one deal and lay out an agenda for the next step,” Bo said.
“Neither side would care much about the purchase scale. The Biden administration may adopt a different benchmark from Trump to evaluate the implementation of the deal. It is also possible that both sides would agree on a partial rollback of tariffs.”
01:22
US-China trade talks postponed as Trump says he does not want to talk to China
China will continue to implement the deal but it has been clear about the bottom line – the removal of punitive tariffs, according to Lu Xiang, a researcher on China-US relations at the Chinese Academy of Social Sciences.
“Both sides should start formal and substantive negotiations to set the course for the rest of the year, either on phase one – whether and how to take supplementary action – or on a wider range of trade and economic issues,” Lu said.
What markets need: a US-China-Europe trade deal
A government adviser who requested anonymity noted the uncertainties surrounding the talks.
“We need to talk before the deal ends and to discuss what to do next, but the key is how to restart, which involves how to set up the agenda for the talks when China has lost hope in the US,” the adviser said.
