US-China trade truce

The Korea Times - - OPINION - An­drew Ham­mond An­drew Ham­mond (an­drewko­[email protected]­look.com) is an as­so­ciate at LSE IDEAS at the Lon­don School of Eco­nomics.

U.S. Pres­i­dent Don­ald Trump lauded “the in­cred­i­ble deal...one of the largest ever made” with Xi Jin­ping at the re­cent G20 in Ar­gentina.

Yet ques­tions re­main about whether the agree­ment will be any more than a tem­po­rary truce, or the be­gin­nings of the big­ger U.S.-China grand bar­gain Trump wants.

As ever from Trump, the rhetoric sur­round­ing the meet­ing was fuelled with hy­per­bole. The U.S. pres­i­dent de­scribed it as an “amaz­ing ... meet­ing with un­lim­ited pos­si­bil­i­ties”.

Un­der­neath this ap­par­ent wel­come suc­cess of U.S. and Chi­nese diplo­macy, bi­lat­eral ties over­all re­main mixed, and it is un­clear how much per­sonal chem­istry Trump and Xi have in prac­tice, de­spite the praise that the for­mer of­ten gives the lat­ter. This is rel­e­vant as, while eco­nomic and se­cu­rity fun­da­men­tals will largely de­ter­mine the course of ties in com­ing years, per­sonal warmth be­tween the two lead­ers could also be key.

Dur­ing the Obama pres­i­dency, the fact that bi­lat­eral re­la­tions re­mained gen­er­ally cor­dial re­flected, in sig­nif­i­cant part, the per­sonal com­mit­ment of Barack Obama and Xi to sta­bil­ity.

Both rec­og­nized the su­per-pri­or­ity of the re­la­tion­ship, and Wash­ing­ton pur­sued a strat­egy that pro­moted co­op­er­a­tion on softer is­sues like cli­mate change, while seek­ing con­struc­tive en­gage­ment on vexed, harder is­sues such as South China Sea ten­sions.

Mean­while, Xi out­lined his de­sire to fun­da­men­tally re­de­velop a new type of great power re­la­tion­ship with the United States to avoid the clash­ing great power pat­terns of the past. This is an au­da­cious goal, which still lacks any de­tailed def­i­ni­tion, and it is not cer­tain how long the pledge will re­main in place if Trump re­turns again to his pre­vi­ous bel­li­cos­ity to­ward China.

For a while Trump is very of­ten warm in his rhetoric to­ward Xi, in­clud­ing in re­cent days, he and oth­ers in his ad­min­is­tra­tion gen­uinely be­lieves China is a ma­jor threat to the United States.

This is not only true on the eco­nomic front, but also the se­cu­rity do­main too: much of the U.S. pres­i­dent’s anti-Bei­jing rhetoric ap­pears to be based on a con­vic­tion that China rep­re­sents the pri­mary threat to U.S. in­ter­ests glob­ally.

Out­side of North Korea, where Bei­jing and Wash­ing­ton co­op­er­ated to pos­i­tive ef­fect dur­ing some of 2018, a string of se­cu­rity is­sues still cloud the bi­lat­eral agenda, in­clud­ing the South China Sea.

This topic fre­quently brings frus­tra­tions for both sides and last year even the com­par­a­tively mod­er­ate­man­nered for­mer U.S. sec­re­tary of state Rex Tiller­son said Bei­jing should “not be al­lowed ac­cess” to its new, ar­ti­fi­cial is­lands there, a sen­si­tive com­ment given China’s an­i­mus to­ward U.S. sea and air ma­neu­vers near its bor­ders.

Yet, it is eco­nomic dis­putes that are cur­rently at the fore of the bi­lat­eral re­la­tion­ship. Trump has of­ten as­serted that “China...has been very tough on our coun­try. We prob­a­bly lost last year $500 bil­lion in trade to China. Think of it: $500 bil­lion.”

And it is this nar­ra­tive that Trump may yet re­turn to in 2019, if not be­fore, if he judges it in his po­lit­i­cal and eco­nomic in­ter­ests with his 2020 re-elec­tion cam­paign fast ap­proach­ing.

As well as his con­cerns about U.S. trade deficits and pur­ported U.S. job losses that come from this, he has re­peat­edly called Bei­jing “grand cham­pi­ons of cur­rency ma­nip­ula- tion,” as­sert­ing the coun­try is keep­ing its ex­change rate ar­ti­fi­cially low in or­der to se­cure an ex­port ad­van­tage.

On the face of it, there­fore, it ap­pears much too soon to dis­miss the prospects that ten­sions be­tween Bei­jing and Wash­ing­ton will def­i­nitely sub­side in 2019. Yet such is the mer­cu­rial na­ture of Trump, it re­mains gen­uinely un­clear when he might po­ten­tially seek to up the ante again.

Ul­ti­mately, as he moves into the se­cond half of his term in of­fice, he needs to show his U.S. po­lit­i­cal base a wide range of con­ces­sions from China on these is­sues to seek to ful­fill his “Amer­ica First” agenda.

Here he has pre­vi­ously as­serted that “ev­ery­thing is un­der ne­go­ti­a­tion,” and what he ide­ally fa­vors — build­ing on the re­cent diplo­macy with Xi over North Korea — is a wider grand bar­gain with Bei­jing ex­tend­ing be­yond the eco­nomics arena, where one of his key asks is to see the Chi­nese cur­rency floated, to other se­cu­rity is­sues too.

If such a deal can be pulled off, it would po­ten­tially pro­vide for greater over­all sta­bil­ity in the world econ­omy and limit dam­age to the cur­rently creak­ing in­ter­na­tional trade sys­tem which risks be­ing un­der­mined fur­ther by a ma­jor U.S.-China spat. An agree­ment of this kind could also have a broader pos­i­tive ef­fect on in­ter­na­tional re­la­tions, help­ing un­der­pin a re­newed ba­sis for bi­lat­eral re­la­tions un­der the Trump pres­i­dency into the 2020s.

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