US-China Trade War: It’s Time For A Change In Strategy

20-Aug-2019 Intellasia | Forbes | 6:02 AM Print This Post

The June 29 truce in the trade war between the United States and China lasted just over one month. Thirty-three days after the presidents of the two countries met in Osaka, Japan, and agreed to resume negotiations, President Trump, frustrated by the slow progress of negotiations, announced that the US would impose a 10 percent tariff on an additional $300 billion worth of Chinese imports on September 1. The financial markets were rocked by the sudden reversal, and analysts wondered: “What triggered Trump’s announcement?”

There appear to be two reasons for the change of heart. The first is relatively simple and easy to fix. In exchange for the US agreeing to hold off on the imposition of tariffs on an additional $300 billion of goods from China, as well as delaying restrictions against Huawei Technologies and allowing American companies to resume sales to the telecom company, China agreed to begin purchases of agricultural products and to stem the flow of fentanyl into the US But US officials claim that China has not followed through on its commitments.

Controlling a large number of black market players and stopping the export of fentanyl in the free-for-all market that is China is admittedly a difficult proposition, and the Chinese argue that US complaints are without merit. However, purchases of agricultural products are very straightforward and well within the control of Beijing. Also, China is a net importer of food products and needs to purchase soybeans and other agricultural commodities from somewhere. Why not the US? If China demonstrated its good faith by purchasing US agricultural products, US officials would have more leeway to be flexible on fentanyl.

A Legalistic Approach Does Not Work

Chinese President Xi Jinping shakes hands with U.S. President Donald Trump before a bilateral meeting during the G20 Summit on June 29, 2019 in Osaka, Japan. (Getty Images)

Chinese President Xi Jinping shakes hands with U.S. President Donald Trump before a bilateral meeting during the G20 Summit on June 29, 2019 in Osaka, Japan. (Getty Images)

A more fundamental reason for the breakdown in talks, however, is that the legalistic approach being taken by the US negotiators to resolve disputes under the agreement is precisely the wrong way for America to achieve its objectives.

When talks broke off in May after eleven rounds of negotiations, Larry Kudlow, the White House economic adviser, explained that China needs to agree to “very strong” enforcement provisions for an eventual deal and said the sticking point was Beijing’s reluctance to put into law changes that had been agreed upon. After Trump’s August 1 announcement, a New York Times article attributed the breakdown in talks as follows: “The United States has insisted that China buy more farm goods and agree to cement certain changes into Chinese law. Beijing has resisted codifying any changes into law and has said it will only enter into a deal that is mutually beneficial.”

https://www.forbes.com/sites/jackperkowski/2019/08/18/u-s-china-trade-war-its-time-for-a-change-in-strategy/#7f7391266baf

 


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