After jousting with customs duties and negotiating a precarious relaxation, Washington and Beijing are considering a new mechanism aimed at regulating their trade.
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For some observers, this risks distorting free competition. Others see it as a way to pave the way for more peaceful cohabitation between the world’s two leading economic powers.
Some keys to explaining the work in progress, before a hypothetical meeting between Presidents Donald Trump and Xi Jinping.
What is it about?
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Following a meeting on March 15 and 16 between senior American and Chinese economic officials in Paris, White House Trade Representative (USTR) Jamieson Greer indicated that the creation of an American-Chinese “Trade Committee” had been discussed.
According to him, it would be a hybrid mechanism to formalize and determine “what types of products” the United States should export to China and vice versa.
In the opinion of Wendy Cutler, vice-president of the Asia Society Policy Institute, this committee could assess the possibility of increasing trade in non-sensitive products or discuss a mutual reduction of customs duties in non-strategic sectors.
For the moment, she underlines in an analytical note, those responsible seem to be on the verge of unlocking purchasing commitments from China (agricultural products, energy, aircraft).
Is this new?
Chad Bown of the Peterson Institute for International Economics sees it as a form of “regulated trade.” He cites to AFP the example of Japan which, in the 1980s, had voluntarily slowed down its car exports to the United States.
More recently, during Donald Trump’s first term, Washington and Beijing signed an agreement in which China committed to importing more American products, worth $200 billion over two years. This commitment did not materialize.
Why does this cause concern?
“Instead of removing regulations, reducing tariffs and making it easier for companies to decide what they sell and at what price, the system would become more bureaucratic,” warns Joerg Wuttke, partner at the consultancy DGA-Albright Stonebridge Group.
“It’s not a good sign,” he added to AFP. “Where are the laws of the market?” According to him, this approach could reduce competitiveness and annoy other countries.
An American business leader who requested anonymity wonders: if the government controls trade, how will it choose priority companies and preferred sectors?
Will the relationship be better?
According to Chad Bown, the new mechanism could prove more successful than previous attempts to smooth over their trade disputes.
“It is clear that the old system was not working. Could we try something else?” he suggested, emphasizing that a “more lasting relationship” was better than “constantly rekindling conflicts”.
But, for this to work, the agreement must be acceptable and realistic for each of the signatories. “Both parties should make a sincere commitment,” he warns. “And, even so, it will be really, really difficult.”
