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Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

August 28, 2023

Finally, a ray of hope for rebuilding the US-China Trades as Chinese Commerce Minister Wang Wentao and US Commerce Secretary Gina Raimondo held “rational, candid and constructive” talks on Monday in Beijing. Some tangible results:

  1. New communication channels to address various issues were agreed.
  2. Set up a working group consisting of Chinese and US officials and business representatives to seek solutions on specific commercial issues. 
  3. The two commerce chiefs also agreed to communicate regularly and meet at least once every year.
  4. A communication mechanism for export controls and agreed to carry out technical consultations between experts from the two countries on enhancing the protection of trade secrets and confidential business information during administrative licensing procedures.  

It should be understood that various bilateral official communication channels between the US and China were smooth till President Trump declared tariff war against China in 2017. Now communication channels have restarted, hopefully the hard lesson that there is no winner in tariff war has been learned. The new channels seem to include a feature that “business representatives” and “experts” will be officially recognized at the meetings. Hopefully, these private sectors will be focused on non-political issues and make communications more effective.

Of course, hard work remains but the door for trade negotiations is open now. Trade is an important component of the US bilateral relation, hopefully communication channels including military will also be re-established soon.

China, US agree on new channels to address trade issues

Mechanisms for talks ‘necessary’, but concrete actions from Washington needed: experts

Wang Cong and Ma Updated: Aug 28, 2023 11:23 PM

Chinese Commerce Minister Wang Wentao and US Commerce Secretary Gina Raimondo held “rational, candid and constructive” talks on Monday, the second day of the US commerce chief’s four-day high-stake trip to China, and the two sides announced to set up new communication channels to address various issues.  

In a late-night statement, the Chinese Commerce Ministry (MOFCOM) said Wang also raised serious concerns about various US policies toward China such as Section 301 tariffs, semiconductor policies, restrictions on investments and sanctions on Chinese firms, stressing that overstretching the concept of national security is not conducive to bilateral trade. 

Establishment of the new communication mechanisms showed both sides are taking necessary measures to enhance talks to address disputes; however, concrete actions by Washington to address China’s core concerns over crackdown measures are needed for a stable bilateral economic and trade relationship, experts said. 

Even though major differences between the two countries will remain, efforts to stabilize bilateral economic and trade ties and enhance cooperation in areas of common interests could help the US tackle its own economic challenges, including high inflation and lingering recessionary pressure, as the Chinese economy remains resilient thanks to a series of measures to stabilize growth, experts noted. 

Closely watched talks

According to the MOFCOM statement, Wang said economic and trade ties are the ballast stone for China-US relations and China is willing to work with the US based on the principle of mutual respect, peaceful coexistence and win-win cooperation to provide favorable policy environment for the businesses in both countries and promote bilateral trade and investment.   

Raimondo also said that “it is profoundly important that we have a stable economic relationship, which is to the benefit of both of our countries. And in fact, what the world expects of us,” CNN reported on Monday. In a statement, the US Commerce Department also said that Raimondo emphasized the importance of ensuring open lines of communication.

Notably, the two sides announced to establish new communication channels between the commerce authorities of the two countries, including a working group consisting of Chinese and US officials and business representatives to seek solutions on specific commercial issues, according to the MOFCOM. The two commerce chiefs also agreed to communicate regularly and meet at least once every year. The two sides also launched a communication mechanism for export controls, and agreed to carry out technical consultations between experts from the two countries on enhancing the protection of trade secrets and confidential business information during administrative licensing procedures.  

Bai Ming, deputy director of the international market research institute at the Chinese Academy of International Trade and Economic Cooperation, said the mechanisms are mostly procedural items for enhancing communication on the issues, which are necessary but concrete actions from the US are crucial for a stable China-US economic and trade relationship. 

Underscoring her intention to promote certain trade, Raimondo, at an event on Monday, showcased some US personal care products and insisted that 99 percent of trade between China and the US is unrelated to the US’ export controls and trade of products without “national security implications” can flourish, Reuters reported on Monday. “The plan, and the hope, is that our commercial relationship, if done right, can stabilize the political relationship,” Reuters quoted Raimondo as saying. 

Gao Lingyun, a trade expert at the Chinese Academy of Social Sciences in Beijing, said that there are normal communication mechanisms between the two countries and in fact there are also such mechanisms under the phrase one trade agreement

The new working mechanisms could be set up between the Bureau of Industry and Security under the US Commerce Department and relevant departments of the Chinese Commerce Ministry to “communicate about the US’ so-called ‘entity list’ and other restrictions,” Gao told the Global Times on Monday. 

Still, Chinese experts cautioned against having too much expectations from the US. While the US appears increasingly intent on stabilizing economic and trade ties with China, economic and trade issues will serve the US’ overall strategy toward China, under which Washington focuses mainly on restrictions, while developing ties with China comes in second, Wu said. “Thus, they are selectively promoting improvement and development of China-US economic and trade relations. We cannot have too much expectations for the US.” 

Highlighting such a strategy, Raimondo, even as she sought to promote trade between the two countries, said during the meeting on Monday that “in matters of national security, there is no room to compromise or negotiate,” according to the Financial Times. 

However, even as all countries, including China, understandably take various measures to protect their own national security, the US overstretching the concept of “national security” could be the root cause of profound differences, Chinese experts said. Chinese officials have also repeatedly criticized the US for using an overstretched concept of national security to crack down on China. 

“If the concept of ‘national security’ referred to by the US is reasonable, we agree with it and there is a lot of room for bilateral cooperation; however, if the US considers China’s chip industry and sovereignty and rights in the South China Sea as impacting US’ ‘national security,’ then we have a big dispute,” Gao said. 

Li Yong, a senior research fellow at the China Association of International Trade, also told the Global Times on Monday that Raimondo needs to offer “a clearer and groundbreaking interpretation of ‘healthy competition,’” so as to send a more sincere message of cooperation. 

Benefit for the US

US officials’ intensifying efforts to stabilize economic and trade ties with China come as the US economy faces a series of challenges, including persistently high inflation and lingering recessionary risks. Recently, US Fed officials warned of “significant” risks to inflation, which potentially requires more rate hikes, which in turn measures greater pressure on not just the US economy but also the global economy as a whole.

Tian Yun, a Beijing-based economist, said even though the US still seeks to contain China, US officials are also fully aware that they need China to help boost the US’ domestic economy, which is crucial for US officials ahead of elections next year. “They need better economic figures, and for that, they need to stabilize ties with China, in terms of economy and trade,” Tian told the Global Times, while noting that the Chinese economy, while facing challenges, is resilient and an irreplaceable partner for the US.

Raimondo also highlighted the importance of the bilateral economic relationship, which she said is “one of the most significant in the world,” on Monday. “We share over $700 billion of trade,” she said, according to CNN.

Raimondo maintains red lines on national security in Beijing visit

US commerce secretary Gina Raimondo began a tour of China on Monday with a warning that Washington would not bend on national security, while adding that she saw opportunities in the majority of bilateral trade that did not touch on sensitive issues. Speaking to her counterpart, Chinese commerce minister Wang Wentao, in Beijing as part of a trip designed to reinvigorate dialogue between the two sides, Raimondo said the US believed “a strong Chinese economy is a good thing”. “Of course, in matters of national security, there is no room to compromise or negotiate,” Raimondo said. “And as you say, the vast majority of our trade and investment relationship does not involve national security concerns. And in this regard, we are committed to promoting trade and investment in those areas that are in our mutual best interest.” Raimondo’s four-day visit to Beijing, the fourth by a cabinet-level US official this year, is part of efforts by Washington to put the bilateral relationship with China on a firmer footing. China is incensed at efforts by US president Joe Biden to continue tightening restrictions on technology-related exports and investments in China, including curbs announced this month designed to stop US funding from flowing to the Chinese military. But Beijing is struggling with flagging foreign and domestic investor confidence. A slowdown in its property sector and weakness in exports have hit economic growth. Once confident in being able to attract foreign investors, Chinese officials are now trying to reignite overseas interest and convince factory owners to expand, just as many of them are weighing alternatives elsewhere in Asia. Raimondo later told a gathering of US businesses that she spoke with Wang for four hours, including a two-hour lunch. The two sides agreed to set up an “export control enforcement information exchange”, which the US said would serve as a platform to “reduce misunderstanding of US national security policies”. The first meeting of this exchange would be on Tuesday this week. The two sides also would start a commercial issues working group involving government and private sector representatives to meet twice annually. Finally, they planned to convene experts for discussions regarding strengthening the protection of trade secrets and confidential business information during administrative licensing proceedings. There would also be annual minister-level meetings. Raimondo said the US-China trade relationship, worth $700bn, was one of the world’s most significant, and it was “profoundly important” that the two sides had a “stable economic relationship”. She said investments by the Biden administration to strengthen supply chains in the US were not intended to “hinder China’s economic progress”. The Biden administration last year signed into law the Inflation Reduction Act and the Chips and Science Act, which award tax credits, subsidies and loans to develop domestic industries in clean technology and semiconductors. Raimondo singled out healthcare, climate change and “people-to-people” ties as areas in which the two sides could work together. China’s Wang said most US-China trade was of a “benign” category and should be allowed to continue unhindered. He said he was willing to work with Raimondo to foster “a more favourable policy environment” and “inject stronger impetus into world economic recovery”. Raimondo said later at a presentation on US personal care products marketed in China that 99 per cent of American trade with the world’s second-largest economy was not related to goods subject to export controls. “Can you promote and protect at the same time? Absolutely, and this is a perfect example,” she said. “The plan and the hope is that our commercial relationship, if done right, can stabilise the political relationship.”

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