Rifts resur­face

U.S. and China still dif­fer on trade, even af­ter friendly sum­mit

The Guardian (Charlottetown) - - BUSINESS - BY PAUL WISEMAN AND JOSH BOAK

Cake and con­ver­sa­tion, it seems, can go only so far to mend long­stand­ing eco­nomic rifts be­tween the United States and China.

Three months af­ter Pres­i­dent Donald Trump and his Chi­nese coun­ter­part, Xi Jin­ping, shared choco­late cake at an ami­able sum­mit in Florida, ten­sions be­tween the world’s two big­gest economies are flar­ing again.

Just as of­fi­cials of the two na­tions pre­pare to meet Wed­nes­day in Wash­ing­ton, the Trump ad­min­is­tra­tion is con­sid­er­ing slap­ping tar­iffs on steel im­ports, a step that risks ig­nit­ing a trade war. For the United States, it’s a per­ilous op­tion to ad­dress a prob­lem caused largely by China’s over­pro­duc­tion of steel.

And Trump is crit­i­ciz­ing China again for fail­ing to use its eco­nomic lever­age to rein in its neigh­bour and ally, the nu­clear rogue state North Korea.

Could this week’s U.S.-China Com­pre­hen­sive Di­a­logue pro­duce a mean­ing­ful break­through in eco­nomic re­la­tions?

Most China watch­ers are skep­ti­cal.

“I’m not look­ing for any­thing worth­while,” says Derek Scis­sors, a China spe­cial­ist at the conservative Amer­i­can En­ter­prise In­sti­tute.

For one thing, the points of dif­fer­ence be­tween the two coun­tries run deep. For an­other, Xi faces po­lit­i­cal pres­sures at home and won’t want to cause a stir in Bei­jing.

For all the ten­sions be­tween the two na­tions, Trump’s words about Xi him­self have re­mained warm. He has sug­gested that the per­sonal bond he formed with Xi when the two met April 6-7 at Trump’s Mar-a-Lago re­sort can over­come fun­da­men­tal dif­fer­ences on trade and na­tional se­cu­rity. Last week, the pres­i­dent called his Chi­nese coun­ter­part a “friend of mine,” “a ter­rific guy“and “a very spe­cial per­son.“

At a White House event Mon­day, Trump sug­gested that the re­la­tion­ship is so strong that he asked dur­ing the Florida sum­mit to start ex­port­ing U.S. beef to China and that the re­quest was quickly granted.

Trump said that the beef in­dus­try was so pleased to re­turn to China af­ter a 14-year ban that one ex­ec­u­tive from Ne­braska “hugged me, he wanted to kiss me so badly.”

“We wel­come this op­por­tu­nity,” Kenny Graner, a North Dakota cat­tle farmer who is pres­i­dent of the U.S. Cat­tle­men’s As­so­ci­a­tion, says of the China mar­ket. “They have a mid­dle class that’s grow­ing in in­come. It’s big, a lot of peo­ple.”

Af­ter the meet­ing, the pres­i­dent soft­ened his ac­cu­sa­tions of abu­sive Chi­nese prac­tices, dropped his threat to la­bel China a cur­rency ma­nip­u­la­tor and ex­pressed op­ti­mism that China would pres­sure North Korea to scale back its nu­clear pro­gram.

Still, the Trump-Xi re­la­tion­ship has yet to de­liver the sub­stan­tive changes that Trump the can­di­date had promised vot­ers — a core piece of his mantra to put “Amer­ica first.” The eco­nomic ir­ri­tants are likely to vex U.S. and Chi­nese of­fi­cials this week.

Trump had cam­paigned on a prom­ise to shrink Amer­ica’s trade deficits, which he blames for wip­ing out Amer­i­can fac­to­ries and man­u­fac­tur­ing jobs. The United States last year ran a trade deficit in goods with China of $347 bil­lion, the amount by which im­ports ex­ceeded ex­ports. It’s by far the widest gap that U.S. has with any coun­try. Trump says China un­fairly sub­si­dizes ex­ports.

Take steel. From 2000 to 2016,

China ac­cel­er­ated steel pro­duc­tion, rais­ing its share of the world mar­ket from 15 per cent to nearly 50 per cent. As Chi­nese steel poured into the mar­ket, global prices fell, hurt­ing Amer­i­can steel­mak­ers. Scis­sors notes that China has long promised to stop sub­si­diz­ing steel and to slow pro­duc­tion but hasn’t de­liv­ered.

The Trump ad­min­is­tra­tion re­sponded by in­vok­ing a lit­tle-used weapon in Amer­i­can trade law that lets the pres­i­dent tax or re­strict im­ports — if a U.S. Com­merce Depart­ment in­ves­ti­ga­tion finds that they im­peril na­tional se­cu­rity. (The re­sult of Com­merce’s in­ves­ti­ga­tion of steel im­ports is ex­pected soon.) The ra­tio­nale was that the Amer­i­can mil­i­tary re­lies on steel for air­planes, ships and other equip­ment. Steel also goes into roads, bridges and other in­fra­struc­ture.

The prob­lem is that the United States al­ready blocks most Chi­nese steel im­ports. So any tar­iffs or lim­its on im­ports would in­stead hurt other coun­tries, in­clud­ing such staunch al­lies as Canada and South Korea.

SAUL LOEB/POOL PHOTO VIA AP

In this Satur­day, July 8, file photo, U.S. Pres­i­dent Donald Trump, left, and Chi­nese Pres­i­dent Xi Jin­ping ar­rive for a meet­ing on the side­lines of the G-20 Sum­mit in Ham­burg, Ger­many. Af­ter a cor­dial meet­ing be­tween Trump and Xi in April, ten­sions are sim­mer­ing again be­tween the world’s two big­gest economies.

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