Business·Analysis

U.S.-China trade talks are about much more than trade: Don Pittis

Canada watches from the sidelines as Trump extends deadline, but there's a lot more than trade riding on the current round of negotiations between China and the United States.

They are called trade talks but success or failure will set the tone for new world order

This week, China's Vice-Premier Liu He, second from left, met with U.S. Trade Representative Robert Lighthizer, second from right. As talks continue, there's more than trade on the table. (Leah Millis/Reuters)

There are signs of success in this week's high-level talks between the United States and China. That's good for Canada and for the world.

As with any global negotiations, reaching a final resolution will be a long and torturous process.

With no major breakthroughs, the great achievement of this latest round in Washington where Chinese President Xi Jinping's top economic advisor, Vice-Premier Liu He spent two days locked up with U.S. Trade Representative Robert Lighthizer, is that meetings will continue.

The talks are ostensibly about trade. Both sides have imposed painful tariffs on the other's imports. U.S. President Donald Trump has drawn a line in the sand, setting a deadline of March 1, after which he would up U.S. tariffs from 10 per cent to 25 per cent on Chinese imports. 

Extended deadline

On Thursday afternoon, Trump implied he was willing to extend that deadline.

Both economies would be seriously hurt if those tariffs — and the inevitable Chinese response — go ahead. But significant as that may be, there is a lot more riding on this potential deal.

That's because ultimate success or failure will set the tone for a new global economic, and political, reality for decades.

"The important thing is that China and the U.S. are talking," says Jia Wang, deputy director of the University of Alberta's China Institute.

Like many people watching the debate between the world's current two great powers, Jia fears that the sides are so far apart it may be impossible to reach an agreement. She thinks both sides have shown they are willing to make economic sacrifices to obtain other, long-term goals.

Huawei and Apple Store logos are seen in Beijing. The Chinese and U.S. companies are competitors but both have interests in continued global trade. (Jason Lee/Reuters)

"There's already some evidence that the two economies are both suffering, maybe to different degrees," says Wang in a phone interview. "Maybe China is suffering a bit more throughout this process because China is an export-driven economy."

She says that in an ideal world, the best brains of China and the U.S. would work together to make things better for everyone. 

"From what we're seeing now, that's not very likely," Wang says.

Difficult points

As Wang points out, where there's talk, there's hope. Although details of progress by the Liu and Lighthizer negotiating teams have been sparse, Trump's Twitter announcement that he is planning to meet his Chinese equivalent is evidence they have made headway.

"No final deal will be made until my friend President Xi and I meet in the near future to discuss and agree on some of the long standing and more difficult points," Trump Tweeted early Thursday.

Crucially, the difficult points that Trump and Xi must address go beyond mere trade, to the geopolitical relationship between the world's greatest economic and military power and one that would willingly supplant it.

Clearly, China is prepared to make trade concessions to reach a deal.

It has already promised more imports of agricultural goods. The powerful U.S. farm lobby that has borne the brunt of the Chinese riposte to the previous Trump tariffs, likes that idea.

Beijing is also pushing through laws to ban its companies from appropriating technology from foreign firms that invest in China, a sore point with U.S. critics who say the Chinese technological miracle was constructed on the theft of U.S. know-how.

Gen. Robert Brown, commanding general of the U.S. Army Pacific and China's People's Liberation Army (PLA) Lt.-Gen. Qin Weijiang at disaster management exercises last year. China continues to invest in its military. (Aly Song/Reuters)
But experts say that China will be unwilling to budge on some issues, even at a significant economic cost, including anything that tries to hamper the country from building up its own technology. As Wang observes, U.S. moves to block access by Chinese firms to North American high tech has merely served to convince Beijing's hard liners that they must become self-sufficient.

Of course, the U.S. has its own hard liners. Members of Congress from both parties have raised warnings that China is both an economic and political menace. Many analysts have seen Washington's attacks on Huawei as the action of new cold warriors spoiling for a fight.

Dangerous game

It's a dangerous game. Beijing has recently reaffirmed its plan to build a "world class" military.

Some analysts say Trump will be under pressure to make a deal, as the U.S.-China trade war threatens to harm the U.S. economy. Others say his cave-in to Congress over the border wall has convinced China they can call his bluff on trade. 

One China watcher described Beijing's negotiating team as clever strategists who had seen Trump coming and had worked out a careful long-term response.

But the country's recent ham-handed action over the arrest of Huawei executive Meng Wanzhou in Canada weakens the case for Beijing's strategic acumen.

If they really thought Prime Minister Justin Trudeau could arbitrarily overturn a case before the Canadian courts, they were getting bad advice. And if they believed imprisoning or killing Canadians under their arbitrary legal system would strengthen their hand with the Canadian government during an election year, they have no grasp of how democracies work.

If both the U.S. and China act in their own economic best interests, it really is possible that the two sides can reach a trade deal that will prevent the world from descending into a new cold war or, eventually, something worse.

How much more unfortunate for the world if it fails because of bungling.

Follow Don on Twitter @don_pittis

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.

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