Self-Humiliation & US-China Trade Talks

♠ Posted by Emmanuel in , at 5/06/2018 05:55:00 PM
Their underlings got nothing unaccomplished during trade talks, unsurprisingly.
During negotiations and bargaining, you are taught to never begin with your most generous offer, but rather your least generous one to "anchor" talks in your favor. In the recently-concluded US-China trade negotiations, the participants apparently took this lesson to heart. So much so that, well, it is almost impossible to see any common ground achievable that would accommodate their respective starting positions at the current time. Instead of working on plausible starting positions, they have effectively begun with fantasy-themed requests that their respective trade grievances with one another be addressed in full and as soon as possible.

The reported details understandably ended with basically no agreement on anything substantial insofar as each party is asking the other to make politically unrealistic and unrealizable concessions--more so the United States. Here's what the American negotiators asked for, among other things:
  • Reduce the US-China bilateral trade deficit by $200B by 2020 
  • Withdraw current cases filed against the US at the WTO, including those concerning PRC designation as a non-market economy
  • Further, take no retaliatory actions to forthcoming US trade policies (i.e., these aimed at China)
  • Reduce Chinese tariffs in "non-critical" sectors to corresponding ones applied by the US
  • Be subject to tariffs and other restrictions on Chinese products if the PRC does not comply with America's laundry list of demands 
It's pretty obvious that this long list of demands would become contradictory in places. So the United States believes that China should still be classified as a "non-market economy" by the WTO. At the same time, it believes the PRC has the discretion to reduce the bilateral trade deficit by over half through striking an agreement with the Chinese government. Moreover, it accuses the Chinese of using non-market interventions to distort world trade. Which is it, then? If China is supposed to act more like a market economy, then its officials should have limited discretion over the actions of its exporters. That is, global supply-and-demand would determine trade balances instead of the active meddling of the Chinese and American governments. Asking PRC officials to intervene to staunch Chinese exports would constitute a non-market distortion of the sort Americans are accusing the Chinese of practicing (and we presume want to stop). 

Alike what the US is trying to do with steel exporters in the EU and NAFTA, it also seeks to humiliate China by making it unable to file cases against the United States at the WTO over perceived trade violations. Again, what dignified trade partner would choose self-abrogation of one's rights--here as a WTO member--and leave oneself vulnerable to US trade actions without international recourse? Further, effectively asking China to apply the same tariff rates as the world's wealthiest country would also be asking it to abrogate its rights to special and differential treatment accorded to developing countries.

China would be giving up a lot for...uncertain benefits in the age of the mercurial Trump.

That said, the Chinese also presented their own list of unrealistic demands, including:
  • Opening of US government procurement to Chinese electronics firms
  • Stop hindering Chinese technology firms buying US ones on "national security" grounds
  • Allow Chinese e-payment services to operate Stateside
  • Remove the export ban on the allegedly Party-affiliated ZTE
To be sure, the Chinese are not exactly responsive to accusations that it's using unfair means of government support to bolster its technology industry since most demands concern maintaining the status improving market access of Chinese technology firms to the US market as well as removing obstacles to buying American IT concerns. Without having allayed American security fears first, however contrived these are, the Chinese are unlikely to receive better market access Stateside. Indeed, despite PRC firms already receiving increased scrutiny--they hardly got a free pass during previous administrations for buying US firms over "national security" concerns--they are set to receive even more scrutiny.

I get the sense that this was more an event of talking over each other to score with domestic audiences about the other's inflexibility and stubbornness instead of being a realistic exercise in coming up with creditable starting points for eventually striking a deal. As such, a trade war is seemingly inevitable unless drastic changes in both these nations' stances occur fairly soon.