Long and winding road for US-China trade talks — M. K. Bhadrakumar

The trade imbalance part is relatively easy to tackle if China adopts an ‘open wallet’ approach to buy more from the US and resort to the ‘soybean strategy’ (commitment to purchase US agricultural products.) But then, how far this helps the US to tackle its multilateral trade problem is a different matter. (The US ran trade deficit with 102 countries in 2018.) Fundamentally, the problem lies in the US economy’s widening federal deficit over the next decade. In sum, tariff war with China can only backfire by shifting US imports to higher-cost foreign producers.

On the other hand, the structural issues — causing tensions in agriculture, services, technology, intellectual property, technology transfer, non-tariff barriers — are much for formidable and no solution is in sight. To be fair, Trump acknowledged it saying the US ‘does not feel rushed to do a deal’. In order to get a sense of the multiplicity and complexity of structural issues that divide these two very different systems — the US and China — it is useful to dip into the pre-Osaka Chinese white paper released in Beijing on June 2 titled China’s Position of the China-US Economic and Trade Consultations.
The salience of the document lies in Beijing’s determination not to give in on its commitment to indigenous innovation, the important role played by State-owned enterprises, and the country’s strategic focus on emerging industries such as artificial intelligence, fintech, e-commerce, and health science technologies.

The above are non-negotiable principles for China, whereas, the US regards them to be existential threat to American prosperity and the US’ dominance of the world economy. Trump’s China advisor Peter Navarro starkly posed the existential challenge: “China has targeted America’s industries of the future… If China successfully captures these emerging industries, America will have no economic future.”

India Punchline
Long and winding road for US-China trade talks
M. K. Bhadrakumar | retired diplomat with the Indian Foreign Service