A Thousand Reasons by Li-Yi

(17 Jan) The US and China have signed a "phase one" deal to lessen trade war tensions after almost two years of negotiation. General Secretary Xi Jinping was not present for the signing; the officials he sent for the task were not of equal ranking to their US counterparts. There were obvious concerns of criticism within China about “humiliating the nation and forfeiting sovereignty.” 

China made multiple concessionsin the agreement, which included stronger intellectual property rules, ending forced technology transfer, encouraging US imports, removing red tape from American financial services entering China and ending currency manipulation. In exchange, the US promised not to impose tariffs of 15% on Chinese goods worth US$156 bn; these tariffs were supposed to have been implemented last month. Tariffs on another US$120 bn of goods would be slashed in half to 7.5%. However, the US would retain the tariffs already imposed of US$250 bn on other goods. The US declared that it would examine the implementation of the first phase of the agreement and consider the progress of the second phase negotiations to see if punitive tariffs should be maintained.

The crux of the US-China trade war is not the trade deficit, but China’s failure to fulfill its commitments when joining the WTO. China meddled with the global economy using its state power. Forced technology transfer allowed it to steal, copy and counterfeit foreign products and advance its own technology industry. The country’s actions were not limited to subsidizing exports, limiting foreign entry into Chinese markets, imposing taxes unrelated to tariffs, placing non-tariff barriers on trade and monopolizing resources with state-owned enterprises. The CCP’s manipulation of Chinese goods and markets put foreign businesses at an unfair disadvantage to compete with China and even the world; to do business, foreigners must have the state’s blessingand keep its political concerns in mind. The end goal of the US was structural reform of the CCP away from this type of control and to allow genuine free market for international trade. To China, however, the US was asking it to destroy the ruling party and renounce its economic power. Thus, negotiations reached an impasse.

The US has only one trick up its sleeve: tariffs. Its population isthe world’s largest consumer market; its total retail sales of consumer goods exceed that of China. Imposing tariffs on Chinese goods would cause foreign investors to avoid working with China because of high tax rates. However, divesting takes time and the effects of higher tax rates are gradual. China is unlikely to relent until after a year or two when the effects of divestment create a large enough dent in its economy to bring it to its knees.

Can China be trusted? Americans are no fools. There is a “proviso” in the accord where the decision to impose punitive tariffs depends on China’s implementation of the deal. Phase one has China promise to increase US imports by US$200 bn. There are international doubts on whether the Chinese market could properly digest these imports and how it would affect prevailing relationships with suppliers in other countries.

It is always a matter of expediency for China’s administration to rule from the inside out and conceal its mistakes. To avoid further economic shock from continually rising tariffs from the US, China signed the first phase agreement. The second phase would drag in some of the more deep-seated structural issues, including but not limited to demands to cancel export subsidies and monopolization of resources by state-owned primary industries. Such demands would hit a raw nerve among China’s ruling party and upset their core interests. General Secretary Xi Jinping’s comment last year may have referred to this when he said,  “We will resolutely reform what should and can be reformed, and make no change where there should not and cannot be any reform.”

It is difficult to guarantee proper implementationof the first phase of the accord; the outlook for phase two is even worse. Fears exist that divestment from China could not be halted and that American policies against China would stay the same.

During the signing of the phase one agreement, President Donald Trump talked excitedly for an hour as if celebrating a victory. Liu He, the vice-premier sent to sign it on behalf of China, read aloud President Xi’s letter, “We have a thousand reasons to make China-US relations work and not a single reason to disrupt it.”

Looking back at all the official statements from Chinese media in the last two years, have they not been accusing the US of supporting Hong Kong rioters and Hong Kong independence as well as interfering in the presidential elections in Taiwan?The US passed the Hong Kong Human Rights and Democracy Act, the Uyghur Human Rights Policy Act and Taiwan Allies International Protection and Enhancement Initiative (TAIPEI) Act all against China. The Americans even sold arms and ammunition to Taiwan. Should there not actually be a thousand reasons to destroy China-US relations and not a single reason to make it work?How would the slaves who listened to their Chinese masters and protested against the Hong Kong Human Rights and Democracy Act in front of the Consulate General of the United States interpret Xi’s statement? Would they consider it to be humiliating the nation and forfeiting sovereignty?

Source: Apple Daily

https://hk.appledaily.com/local/20200117/CQPDGQFQ3WKTNIVLXLHMKBCF24/