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Xi-Trump Talks: Post-Osaka Outlook

 
 

Trans-Pacific View author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with James Green the creator and host of Georgetown University’s U.S.-China Dialogue Podcast, senior advisor at McLarty Associates, and former Minister Counselor for Trade Affairs at the U.S. Embassy in Beijing (2013-2018) – is the 195th in “The Trans-Pacific View Insight Series.” 

Identify key outcomes of Xi-Trump meeting in Osaka.

In some ways, the meeting itself was the message. And the message was this: that relations between the two largest economies  ̶ between the established and rising superpower  ̶ is being capably handled by the two leaders. Both Xi and Trump used the meeting at the G-20 in Osaka to signal to domestic and international audiences that despite some friction in U.S.-China relations, the two leaders still have a personal chemistry that can put a floor on bilateral ties. As with the previous meetings between Presidents Trump and Xi, trade and North Korea dominated the discussion in Osaka  ̶ and the outcome for both is that U.S.-China discussions will continue. On trade, negotiators will resume talks soon. On North Korea, Xi Jinping’s recent trip to Pyongyang dealt China back into the budding Kim Jong Un-Donald Trump bromance.

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Explain policy implications of this meeting for U.S.-China trade relations.

Press reports have explained the trade outcome from the G-20 as a “truce” in the trade conflict, although that is a generous interpretation. President Trump claimed that China agreed to purchase a large number of U.S. agricultural exports as part of the process to return to the negotiation table. For its part, the United States agreed to not impose new 25 percent tariffs on the remaining $300+ billion of Chinese exports  ̶ a process that the U.S. is publicly pursuing as part of the Section 301 investigation for Chinese forced technology transfer policies. But given that the 25 percent tariffs remain on $250 billion in Chinese exports and China had insisted on all tariffs being lifted, the upcoming negotiation round should be described as a pause at best.

So, what’s the next step? United States Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will likely return to Beijing to resume negotiations with Vice Premier Liu He. They will likely use the 150-plus page negotiation text both sides have sent back-and-forth over several months as a starting point. That document reportedly includes (1) targets for Chinese purchases of U.S. goods, (2) new market access sectors opened for foreign companies, and (3) some restrictions and increased transparency on Chinese industrial policies and subsidies.

Explain business implications of this meeting for U.S.-China trade relations.

The largest U.S. concession in getting back to trade negotiations was the apparent agreement to permit the resumption of some U.S. corporate sales to Huawei, despite the Department of Commerce placing the Chinese telecommunication giant on the “entities list.” For U.S. companies that sell products and services to Huawei, this may be a short reprieve, a medium glide path to eliminating sales over time, or a complete exoneration of the company. Some heavyweight U.S. senators have already publicly warned the administration about Huawei’s national security concerns and urged the White House not to remove Huawei from the entities list.

Analyze strategic messaging from Presidents Xi and Trump to their domestic and global audiences.

Although President Xi does not face a voting public or an adversarial press, he needs to demonstrate to the Beijing and Communist Party elite that he is successfully managing relations with the United States. Xi is portrayed domestically as a leader advancing China’s trade and foreign policy interests with the United States, even if some in the propaganda apparatus are putting out more shrill go-it-alone strategies. Internationally, Chinese officials often strike a pose of defiant victimhood when explaining the current state of bilateral trade tension.

President Trump has garnered some support from both sides of the aisle for his confrontational approach to trade with China, even if members of Congress would have preferred that the U.S. not unilaterally deploy tariffs. Trump’s message to farmers hit by Chinese retaliatory tariffs has been that the current pain will be worth the eventual gain to the U.S. economy. Internationally, the administration touts the close personal relationship between Trump and Xi  ̶  ties that seem to contrast sharply with the rocky friendships the U.S. president has with many European and North American allies.

What is your outlook for bilateral dialogue going into 2020 and how might U.S. presidential contenders stake out their policy positions on U.S. China policy?

For President Trump, he will have to weigh the potential benefits of a trade agreement against the potential political upside of campaigning as not having settled for a deal. Trade talks will likely continue in fits and starts, with drama and agreements one day, followed by disappointments and recriminations the next. The broader discussions that previous administrations had with Chinese counterparts  ̶  about the global system, Iran, financial stability, counterterrorism  ̶  do not have the diplomatic infrastructure to be held at senior levels of the Trump administration.

For Democratic candidates, the question of what to do about China will be wrapped up in larger issues about America’s place in the world, international institutions  ̶  should they support the WTO or unilateral tariffs?  ̶  relations with friends and allies, the role of human rights in U.S. foreign policy, and deeper questions of investment in U.S. competitiveness and innovation.

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