Economy

Back from the brink

Negotiating teams call for a break on the march towards trade war

Trump-w

They’ll buy all we can grow...

Global markets were cheered last Saturday by news that Beijing and Washington are putting tariffs on hold as they try to reach a deal in the trade row that has strained ties since the beginning of the year.

The formal statement said that the two countries had agreed on a framework to “substantially reduce” America’s trade deficit with China.

There is already concern from Trump’s opponents in America that he is making a mistake in conflating the trade deficit with the US sanctions on Chinese telecoms equipment firm ZTE, as well as the wider row over tech transfer and the protection of intellectual property.

Hence the warnings from Senate Minority Leader Chuck Schumer that the White House mustn’t “blow it” in its negotiations with the Chinese. “There is nothing wrong with these talks but the proof of the pudding is in the eating,” he said in a statement. “If President Xi is going to escape meaningful punishment for ZTE and fail to take strong actions on intellectual property, cyber theft and American companies having free access to sell goods in China, and instead simply provide a promise to buy goods for the next few years, we will have lost.”

Other critics of the truce didn’t like the fact that there are no details on the goods that the Chinese are going to buy.

The wording on measures to protect American IP was similarly vague, with commitments from both sides to “strengthen cooperation” and a promise that China would “advance relevant amendments” to its patent laws.

Senior officials in the Trump administration have countered that greater detail will be delivered after the next round of negotiations and Treasury Secretary Steve Mnuchin is already promising “very hard commitments” in agricultural exports, as well as a doubling in energy sales.

“I think you could see $50 [billion], $60 billion a year of energy purchases over the next three to five years. And strategically, that’s very important for us and very important for them,” he told reporters.

But that wasn’t good enough for hawks in the US, who pointed out that the Chinese need to buy energy from someone and that they rely on imports of animal feed and meat to satisfy domestic demand too. In that context, the concessions being signalled by Beijing seem like less of a sacrifice.

Of course, the Chinese aren’t even describing them as concessions and they were quick to deny reports in the American press that Vice Premier Liu He had offered to cut China’s trade surplus with the US by $200 billion during his trip to Washington.

A foreign ministry official said that no offer had been made. The commentary in the Chinese media took a similar line. Xinhua was predictably unimaginative in describing the truce as a “good example of win-win” before insisting that Beijing would never give in to “unreasonable demands” from Washington. The China Daily thought the same: “Despite all the pressure, China didn’t fold, as US President Donald Trump observed. Instead, it stood firm and continually expressed its willingness to talk.”

The People’s Daily saw no sign of retreat either, denying that the Chinese had submitted to outside pressure. And anyway, China already needs more imports to satisfy demand from its increasingly affluent consumers, the newspaper wrote.

Back in the US, commentators poured more cold water on the kind of deal that Trump seems to want, arguing that even if the Chinese were to agree to buy $200 billion more goods, the US economy wouldn’t be able to produce enough of them to complete the shipments.

And the latest from Washington on Wednesday was that Wilbur Ross, the Commerce Secretary, is pushing for American compliance officers to be embedded at ZTE as part of any deal. Ross told CNBC that no final decisions have been reached but that the Trump administration is determined to “change the behaviour” of the Shenzhen-based firm.


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