The Trump-Xi Trade Talks
US President Donald Trump arrives in China on the heals of the Communist Party Congress in Beijing, and Chinese President Xi Jinping will welcome President Trump as the most powerful leader in China since Mao Zedong. Trump is due to land in Beijing tomorrow.
That scenario, combined with Trump’s eroding support at home, will play out in his talks with Xi on trade. Xi’s consolidation of power, ironically, could make him more reluctant to agree to any breakthroughs on trade. Meanwhile, trump’s abandonment of the Trans-Pacific Partnership and his embrace of bilateral economic relationships will cast a pall on talks with other Asian partners during the trip.
Xi’s consolidation of power “has both benefits and risks for President Xi,” said Christopher K. Johnson, an Asian affairs specialist at the Center for Strategic and International Studies at a press briefing in Washington last week. “On the benefit side, obviously he’s in a very strong position with no visible or other domestic opposition.
“One down side of heavy consolidation of power is that there’s no one else to blame inside your system, especially on trade policy and on North Korea policy,” Johnson added.
That means Xi won’t be able to make the case that the state-owned enterprises or his military won’t let him proceed with policy advances. “I would expect President Trump to play that card in his discussions,” said Johnson.
But to what end? The Chinese ambassador in Washington recently said he expected movement on North Korea and trade during the Trump-Xi talks. Thus far advances have been made on items such as
US beef imports and electronic payments, all things that had been raised in negotiations with the previous administration.
“The sense I get is China’s willing to sign trade deals all day long, as long it stays away from industrial policy and the sort of market access issues that they’re seeking to avoid,” said Johnson. “The challenge we face, is just a lack of clarity in general on the US priorities going into this meeting.” US business interests in China have expressed concern over the lack advance work done on behalf of the US delegation.
The United States would like to raise issues of trade deficits, forced technology transfer, and intellectual-property, according to Matthew Goodman, a senior adviser for Asian economics at CSIS. “So the question there is how much that’s going to be a central part of the actual conversation between the leaders or the broader public announcements,” said Goodman. “I think they seem to be putting an accent more on big signing ceremonies, or…signings of deals to sell specific products and services.”
All this means it’s doubtful there will be much discussion of underlying economic issues—issues such as economic reform in China, a movement toward a consumption-led, domestic-demand-led economic model “That is really what is fundamentally behind the trade imbalances,” said Johnson. “But you don’t hear much talk about a US interest in those issues.”
Hanging over Trump’s head in discussions in China, and also in other of the countries he’ll be visiting, such as Japan and Vietnam, will be his withdrawal of the US from the Trans-Pacific Partnership. “The decision to withdraw from TPP was an unforced error,” said Goodman. “That was the thing we had invested in for seven years, and we walked away from it without a good explanation. And the region is questioning our credibility and our commitment. China, understandably, has tried to step into that vacuum.”
As a result, US economic policy in Asia has been obliterated under the current administration, according to Amy Searight, director of the Southeast Asia Program at CSIS. “That’s gone with the withdrawal of TPP,” she said, “and there is nothing to replace it.”
The Shifting US-China Trade Landscape