Trade ter­rain for­ever changed be­tween US, China

The Myanmar Times - - International Business -

THE trade talks that Pres­i­dent Don­ald Trump and Chi­nese Pres­i­dent Xi Jin­ping launched this week­end have raised hopes for a peace­ful res­o­lu­tion of the trans-Pa­cific tar­iff war - but the eco­nomic re­la­tion­ship be­tween the U.S. and China has been per­ma­nently al­tered.

Over din­ner fol­low­ing the Group of 20 sum­mit Satur­day, Trump agreed to can­cel a planned Jan. 1 tar­iff in­crease in re­turn for in­creased Chi­nese pur­chases of Amer­i­can farm and in­dus­trial goods.

The two sides also will com­mence talks about “struc­tural changes” in Chi­nese prac­tices, in­clud­ing forced tech­nol­ogy trans­fer, trade se­crets theft, and non-tar­iff bar­ri­ers. The goal is to se­cure an agree­ment in 90 days.

“Mar­kets should be happy, in that the worst is post­poned. But I don’t see the West ever go­ing back to busi­ness as usual with China. Too many ge­nies have been let out of bot­tles,” said Fraser Howie, au­thor of “Red Cap­i­tal­ism,” a book about China’s fi­nan­cial rise, in an email.

Over the past quar­ter cen­tury, Amer­i­can man­u­fac­tur­ers grew de­pen­dent upon low-wage Chi­nese work­ers to pro­duce iPhones, cloth­ing and in­dus­trial parts, of­ten at the ex­pense of fac­tory em­ploy­ees in the in­dus­trial heart­land.

China, in turn, in­vested more than $140 bil­lion in the United States since 2000, ac­cord­ing to the Rhodium Group, fur­ther knit­ting to­gether two economies that ac­count for roughly 40 per­cent of global out­put.

But al­most a year of heated U.S. rhetoric, es­ca­lat­ing tar­iffs, and tighter in­vest­ment and ex­port con­trols have shaken Chi­nese gov­ern­ment of­fi­cials and global busi­ness ex­ec­u­tives.

As re­peated tar­iff salvos prompt com­pa­nies to re­think their reliance upon Chi­nese fac­to­ries, Bei­jing is step­ping up ef­forts to wean it­self from what it sees as an un­pre­dictable Amer­i­can part­ner, ac­cord­ing to trade an­a­lysts, busi­ness ex­ec­u­tives and for­mer gov­ern­ment of­fi­cials.

“Both sides have set in mo­tion poli­cies that won’t be up for ne­go­ti­a­tion. So it’s not re­al­is­tic to ex­pect a re­turn to the sta­tus quo,” said Wendy Cut­ler, a for­mer U.S. trade ne­go­tia­tor now with Akin Gump, via email. “We are in a new world.”

A great deal has changed be­tween Wash­ing­ton and Bei­jing in the al­most two years since Trump be­gan im­ple­ment­ing his “Amer­ica First” trade pol­icy over­haul - and it can­not read­ily be un­wound.

The pres­i­dent’s abrupt re­turn to brinkman­ship over a new North Amer­i­can trade deal, which he signed Fri­day along with lead­ers of Mex­ico and Canada, un­der­scored U.S. un­pre­dictabil­ity.

Re­turn­ing to Wash­ing­ton, Trump told re­porters aboard Air Force One that he will with­draw the United States from the ex­ist­ing North Amer­i­can Free Trade Agree­ment to present Congress with an all-or-noth­ing vote on the new pact.

“I’ll be ter­mi­nat­ing it within a rel­a­tively short pe­riod of time,” he said. “It’s been a dis­as­ter for the United States. It’s caused us tremen­dous amounts of un­em­ploy­ment and loss and com­pany loss and ev­ery­thing else.”

Many an­a­lysts are skep­ti­cal that China will make fun­da­men­tal changes to its state-led eco­nomic sys­tem in the 90-day talks. But even if it does, and the U.S. tar­iffs are lifted, the other im­ped­i­ments to free-flow­ing goods and cap­i­tal will re­main.

Trump has re­sorted to tar­iffs more freely than any Amer­i­can leader since the 1930s, and his harder line on China ex­tends well be­yond im­port taxes. The United States is re­strict­ing Chi­nese in­vest­ments in Sil­i­con Val­ley, plan­ning new lim­its on ex­ports of ad­vanced tech­nol­ogy prod­ucts, re­think­ing stu­dent and sci­en­tific visas, and ac­cus­ing China of “eco­nomic ag­gres­sion.”

Trump’s im­po­si­tion of tar­iffs on more than $250 bil­lion in Chi­nese goods al­ready has prompted China to re­tal­i­ate by buy­ing soy­beans from Brazil rather than In­di­ana or Iowa.

The pres­i­dent’s han­dling of ZTE, a state-owned telecom­mu­ni­ca­tions firm that vi­o­lated U.S. sanc­tions on Iran and North Korea, spurred Xi to ac­cel­er­ate plans for China to be­come self-suf­fi­cient in tech­nol­ogy.

In a water­shed mo­ment, the Com­merce De­part­ment ear­lier this year banned U.S. com­pa­nies from sell­ing to ZTE, a crown jewel of China’s tech­nol­ogy in­dus­try, af­ter it was caught vi­o­lat­ing the terms of an ear­lier set­tle­ment of crim­i­nal and civil charges re­lated to il­licit sales to Iran and North Korea. – The Wash­ing­ton Post

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