By Zhang Jingwei Source: Asia Times Published: 2019-7-15
The leaders of China’s and the United States’ economic and trade consultation teams spoke over the phone on the evening of July 9 on the implementation of the consensual exchanges agreed by the two nations at the recent Group of Twenty summit, according to a spokesman for China’s Ministry of Commerce.
The Americans appear to be showing goodwill for the upcoming round of talks. The US Department of Commerce has announced that it will partially lift the Huawei ban by removing restrictions on exports to the firm and eliminating tariffs on 110 Chinese products that were previously hit with a 25% levy.
However, Huawei is still on the backlist of the US “entity list.” Only non-critical components had their sanctions lifted, which was done at the request of US companies. In addition, the 110 Chinese goods that had their tariffs lifted were under the normal tariff exemption mechanism, which overall is more favorable to American consumers.
In the past year, the US has shown no mercy in pressuring China. A high-tariff policy on China’s exports to the US – valued at US$250 billion annually – had been implemented. China also retaliated by imposing tariffs on $94 billion worth of US goods.
While China’s tariffs do not match those of the US, the United States stands to lose even more. Benn Steil, the director of international economics at the Council on Foreign Relations, and CFR analyst Benjamin Della Rocca pointed out in The Washington Post that the trade war did not bring in “FAR MORE wealth to the US than even a phenomenal deal of the traditional kind” as US President Donald Trump said on Twitter. The tariffs only brought $8 billion into the coffers of the US government, which had to give out more than $25 billion in subsidies to farmers because of the retaliation from China. US exports to China have decreased by 15% as well.
Before the G20 summit in Osaka, hundreds of companies opposed any additional tariffs as Trump’s trade war with China not only failed to resolve trade imbalances but also caused companies to see their incomes decline.
Manufacturing industries did not leave China, nor was foreign capital withdrawn from the Chinese market. From January to June this year, 20,131 foreign-invested enterprises were established in China. The use of foreign capital increased by 7.2% to 478.33 billion yuan ($70.74 billion.)
As for the frictions over science and technology, the pressure on Huawei did not end as planned, as the company pulled out its “spare tires” program and is set to use the independent Haisi chip as well as its own in-house Hongmeng operating system.
Huawei has since received 50 orders throughout the world for its fifth-generation (5G) equipment, further highlighting that the sanctions have borne no fruit.
Although the United States remains arrogant and China retains its stern stance, it is worth pointing out that Chinese Commerce Minister Zhong Shan’s participation in the upcoming trade talks with the hawkish US team promises to make the negotiations a bit more balanced.
The power balance in the third round of the China-US economic and trade consultation is most likely to be even. With that being said, rebuilding trust will be key in the negotiations. As China is about to introduce an “unreliable list” system to counter the US entity list, the US has also extended frictions to the Taiwan Strait by passing a new arms-sales bill. In the end, only bilateral consultation can result in a win-win situation.
The author is a visiting fellow with the Chongyang Institute for Financial Studies, Renmin University of China.