Without good faith, China-US trade talks can head nowhere

Note: The following is taken from a signed article by Linghu Mao published on the Chinese language current affairs WeChat account Taoran Notes

The atmosphere between China and the United States has been undergoing rapid change since the 11th round of China-U.S. trade talks concluded in Washington D.C. The Chinese delegation refuted American allegations that China had reneged on some promises and publicly stated its three core concerns for the first time, namely that all additional tariffs be removed, and that the volume of goods China would agree to purchase was reasonable and that the wording of the agreement must be balanced.

[File Photo: AP]

This was followed by a number of public statements, including editorials on China Central Television’s prime-time evening news and in the People’s Daily, which carried a straightforward and firm message: If the United States continues to blatantly ignore the principles of equality and mutual benefit in the negotiations in the hope it can get what it wants by applying extreme pressure, China will have no choice but to retaliate.

The business world and the financial markets have sent a clear message about the ongoing threat posed by American tariffs. The National Retail Federation, the Consumer Technology Association, the Fashion Industry Association, and the American Soybean Association are just some of the trade organizations that have issued statements voicing their opposition to the announcement of the list of 300 billion U.S. dollars of Chinese goods threatened by further tariffs and urging that the trade talks get back on track as soon as possible.

Washington announced the most recent tariff rise on 200 billion U.S. dollars of Chinese imports right before the start of the 11th round of negotiations.

In the face of the new tariffs and China’s retaliatory measures, American stock markets plunged on Monday, with the Dow Jones Industrial Average dropping 2.38 percent, the steepest decline since January. The S&P 500 nosed down by 2.41 percent, and the NASDAQ closed 3.41 percent down on the same day.

The trouble for Washington is that it wants to look tough and to exert more pressure on China, but at the same time it wants to avoid stirring up opposition at home. This is why it has been claiming that China’s economy is in the dumps and saying that China is eager to seal a deal. It’s ridiculous to debate who wants a deal more badly after so many rounds of talks.

China's Ministry of Commerce spokesperson Gao Feng gestures during a press conference in Beijing on May 16, 2019. He said he was unaware of any plans for U.S. trade negotiators to return to Beijing. [Photo: Ministry of Commerce]

At the same time U.S. Treasury Secretary Steven Mnuchin is talking about plans for another trip to Beijing, which was news to China’s Ministry of Commerce, and is reassuring everyone that the talks haven’t broken down.

In fact, here’s how one should look at it.

This current U.S. approach, wanting to continue talks one minute and bad-mouthing China’s economy the next, is calculated to shore up confidence in American stock markets, but one of the consequences is that it’s damaging the atmosphere for future negotiations.

The situation was further poisoned by the decision of U.S. President Donald Trump on Wednesday to sign an executive order that is largely seen as a move to ban American firms from doing business with the Chinese telecommunications company Huawei. This is a sure sign that the United States isn’t sincere in its willingness to negotiate for a fair and reasonable deal.

Eleven rounds into the talks, both China and the United States are crystal clear about each other’s attitudes and bottom lines. They are also apparent to the rest of the world.

The Chinese side went to the last round of negotiations in Washington with maximum good will despite extreme pressure and hostility from the United States.

However, China's efforts had not been reciprocated. They were even taken as weakness and led the U.S. to believe that it can push China around at will.

Since rational communication only resulted in more greed from the U.S. side, China might as well halt the talks altogether and try other alternatives.

If the United States continues to ignore China's public opinion, it will not get a positive response.

Besides saying they were planning to visit Beijing for more talks, the U.S. side was also hyping up the possibility of a meeting between the leaders of the two countries at the G20 summit in Osaka. However, without good faith and substantive action from the U.S. side, it will be meaningless to visit Beijing to resume the talks.

After the eleventh round of consultations, China has drawn its bottom line by making clear "three core concerns". These matters of principle are where the Chinese government stands, as well as the wish of the Chinese people. The Chinese people would never ever say yes to a deal that doesn’t call off the additional tariffs, allows purchases at the unilateral demand of the United States, and demonstrates imbalance of the text.

When tremendous efforts, sincerity and good will are taken for granted and worse still taken advantage of, the Chinese side might as well respond with countermeasures while focusing on doing its own things well.

Negotiations require flexibility. But unconditional concessions will never lead to cooperation and a mutually beneficial outcome.

China now says it will fight back against mounting tariffs and it will live up to its words.

Some might argue that the United States is more powerful than China and that China would suffer more losses in a trade war. That is probably the case from a purely economic perspective. However, it is not just economic factors that matter in a trade war. The aggressive change in tone from Washington has left the American public reeling.

Public opinion in China couldn’t be clearer. The Chinese have always been a peace-loving people. In recent decades, they have generally enjoyed growing business opportunities. Most people believe that money and prosperity come from having a peaceful business environment and that profit is better shared.

But if the United States insists on making trouble and thinks it can bring the Chinese people down to their knees, it will find itself taking on the most formidable opponent since 1776.

If it is impossible to avoid a trade war, China will then let the United States know that its tactic of maximum pressure will lead to unexpected consequences.