US-China trade deal at Apec would be temporary pause in 'a growing storm', experts say

Any trade deal signed by presidents Donald Trump and Xi Jinping at their planned meeting in Chile next month will only amount to a temporary pause in a widening rift between the two countries as ideological differences harden, according to Washington experts.

Indications that the two sides are primed to sign an interim trade deal equal "a ray of sunlight amidst a growing storm", said Jude Blanchette, chair in China studies at the Centre for Strategic and International Studies (CSIS). "It's clear that the US and China are headed for a prolonged period of open strategic rivalry ... and I would say this is the consensus on both sides.

"There's a growing appetite for resetting the relationship with China with one that puts national security concerns of the United States first and foremost, and looks to move away from the consensus that integration with China was going to necessarily lead to some form of normalisation or liberalisation of China's political and economic system," Blanchette added.

An October 11 agreement between US and Chinese negotiators that delayed new tariffs sparked optimism that the two sides are on course to an end to the bilateral trade war that began last year.

Since then, comments by both sides suggesting further progress and expressing expectations that Trump and Xi will sign a "phase-one" deal at the Asia-Pacific Economic Cooperation (Apec) summit in Santiago, Chile, have added to hope that the downward spiral in bilateral relations since Trump took office might stabilise.

The two leaders are expected to meet immediately after the Apec summit, with a trade truce signed "if everything goes smoothly", according to a source briefed on the arrangements, who declined to be identified. Trade envoys from Beijing and Washington are still finalising the text for the two leaders to sign.

Meanwhile, Trump's son-in-law Jared Kushner, who is also a White House advisor, told a panel at the Future Investment Initiative conference in Riyadh that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin "have made a fabulous deal" with Beijing.

However, outstanding issues ranging from China's Uygur detention camps, the Hong Kong pro-democracy protest movement, and Beijing's likely reluctance to enforce agreements, threaten to prevent the two sides from stabilising the relationship, said Blanchette and Matthew Goodman, a senior vice-president and senior adviser for Asian economics at CSIS.

Last year, China began drafting laws to encourage voluntary transfers of technology by foreign companies to local partners, but prohibiting such transfers by coercive administrative means, to address one of the US Trade Representative's key complaints.

While China has shown increased resolve to protect the intellectual property of foreign companies operating there, the government has not yet been able to tackle violations, according to Goodman.

"They find it, for a variety of reasons, difficult in practice to enforce those laws, particularly on the local levels," Goodman said.

And further reforms to the control that the Chinese government has over the economy, including the issue of subsidies, will be an obstacle further down the road, Blanchette said.

"Xi Jinping has been clear again and again that, unlike previous incarnations of Chinese leaders from Deng Xiaoping through Jiang Zemin and Hu Jintao, they're not looking to make fundamental reforms to the economic system away from state control," he explained.

"Nowhere in the negotiations have we really gotten close to making a dent in China's subsidies. This will be the sticking point. This is what's going to be so hard" in efforts to resolve the trade war, he said.

After escalating tariffs on each other's imports throughout the trade war that started in July last year, this month's agreement in Washington paused USTR's plan to impose an additional 5 per cent duty on US$250 billion worth of Chinese goods on October 15, which would have raised the levy to 30 per cent.

No decision was reached on whether fresh duties of 15 per cent on US$160 billion of largely consumer products, slated to take effect in December, would also be paused.

Additional reporting by Zhou Xin

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.