TWN Info Service on WTO and Trade Issues (Feb19/02)
7 February 2019
Third World Network

US President Trump under pressure to cut a deal with China

Published in SUNS #8836 dated 31 January 2019

Geneva, 30 Jan (D. Ravi Kanth) – As the United States and China hold another round of high-level trade talks in Washington on Wednesday (30 January), pressure appears to be mounting on US President Donald Trump to cut a deal with Beijing in the face of worsening domestic political and economic challenges, including the negative fallout from the partial federal government shutdown.

Notwithstanding the economic woes faced by the Chinese government due to a perceptible slowdown in its economic growth and concerted unilateral actions by several Western governments against the Chinese telecom company Huawei, China stands on a stronger wicket to test the US resolve because of a divided Trump administration, say trade envoys who asked not to be quoted.

With the US team led by two China hawks – the US Trade Representative Ambassador Robert Lighthizer and the White House trade adviser Peter Navarro – prospects for a deal from the two-day talks hang in the balance.

The USTR has repeatedly argued that Washington’s core priority is to stop China’s 2025 economic program that seeks to transform China into a dominant player in various high-technology sectors, particularly in Artificial Intelligence (AI) and robotics.

Ambassador Lighthizer has targeted China in several areas, including over the alleged theft of intellectual property and forced technology transfer, two areas where the US charges are yet to be established either at the World Trade Organization or any other credible multilateral body.

In what seems to be a move to assuage the American concerns against the forced transfer of technology, China’s official Xinhua news agency reported on Wednesday that the National People’s Congress would vote on a new law to ban “forced” technology transfers.

The proposed Chinese law aims at a streamlined foreign investment framework on technology “cooperation” through negotiations.

It remains to be seen whether the maximum pressure exerted by the US on China on several fronts, including on the security side, can break China’s determination and arrive at a deal that would be inimical to all its strategic interests.

So far, China has showed flexibility in addressing the market access demands raised by the American negotiators but has stood its ground on its national economic policies, according to several media reports.

Several senior officials in the US administration, including the commerce secretary Wilbur Ross, expressed concern that there has been little progress on major issues raised by the US on the alleged theft of technology.

In a news report published in The Wall Street Journal on Wednesday (30 January), it is argued that President Trump is coming under pressure to strike a deal even though he reckons that he has an upper hand due to “China’s lagging economic growth.”

“Chinese tariffs imposed to counter US levies are unpopular with leading bu siness groups and have hit regions and constituencies that Mr. Trump counts among his staunchest supporters, including soybean farmers in the Great Plains, auto workers in the Midwest and oil-industry workers in the Dakotas and Texas,” according to the WSJ report.

“In a measure of the issue’s significance, Mr Trump mentioned China 18 times in a speech to the American Farm Bureau Federation’s annual conference two weeks ago, offering assurances that a deal was within reach,” the WSJ report suggested.

“Wait until you see what happens” with China, he told the crowd in New Orleans. “They’re already back- ordering, right? … They are going to order, and they have already started.”

Trump’s strategy of mounting unprecedented pressure on countries to yield to American demands in trade over the past two years has yielded mixed results.

But a Republican senator David Perdue has argued that due to the pressure exerted by President Trump in trade conversations across the globe, “now we have an opportunity to get results during these ongoing conversations with China.”

Nevertheless, any failure to reach a deal with China “carries a risk not only for Mr Trump, but for the Republican party,” according to Mary Lovely, a Syracuse University economics professor, as quoted in the WSJ report.

“Republicans in Congress aren’t going to find additional tariffs really a winner back home, and they are already facing concern in large parts of the country over the impact of partial government shutdown,” she argued.

Besides, a negative outcome from the two-day US-China talks that would end on Thursday could move the markets in a downward swing that President Trump fears enormously at this juncture.

The US President is expected to meet the head of the Chinese delegation, Vice Premier Liu He, this week.

The talks will be held in the Eisenhower Executive Office Building next to the White House.

If the talks fail to resolve differences by 1 March 2019, the US has threatened that it would impose additional tariffs of 25% on $200 billion of Chinese goods, up from 10% levies imposed last year.

The proposed increases in tariffs will come into effect on 2 March in case the two sides fail to arrive at any agreement.

Meanwhile, China, which secured a green light on Monday for establishing a WTO dispute panel to rule on the unilateral duties imposed under Section 301 of the US Trade Act of 1974, has exposed the lawlessness created by the US in refusing to implement WTO rulings in several trade disputes, including the US Section 110(5) of the US Copyright Act.

“Almost two decades after the DSB adopted the Panel Report in DS (dispute number) 160, without further implementation, the United States has been continuously failing to provide the minimum standards of protections as required by the WTO TRIPS Agreement.”

China rankled the US by suggesting in its second intervention at the DSB meeting on Monday, that unlike the US, “China takes its commitments under the TRIPS Agreement seriously. We welcome and always stand ready to engage in good faith discussions with Members concerning any intellectual property issue.”