Despite bumps and grinds Trump and Xi appear to be getting on
 The best one can reasonably expect from China-US trade is that it will continue more or less the way it has - and all signs show it is doing just that, if not a bit more.
While times have been hard in recent years, the United States GDP increased 2.1 per cent in the fourth quarter of 2016, and China's 2017 first quarter was up 6.9 per cent. Both countries are in a happier place with less to complain about than they have been.
Despite grand plans to have China become less export-dependent and rely more on increased domestic demand, things have not worked out that way. Despite the planifications of planners, exports are up and imports are down.
Volumes are still huge. US goods and services trade with China totaled US$659.4 billion in 2015. Exports were $161.6 billion; imports were $497.8 billion. American goods and services trade deficit with China was $336.2 billion in 2015, an age-old complaint dating back to the 19th century's Opium Wars.
More cheerfully, the meeting between President Xi Jinping and President Donald Trump appears to have been a success. President Trump was tough enough on China to exact some unspecified diplomatic assistance with Korea, which sounded good to his voting base, but not too upsetting to his recalcitrant and vociferous opponents.
And President Xi was rewarded by having no serious problems aired public, no talk of human rights, or the unpleasantness over the Spratly Island takeover in the South China Sea, and certainly no nastiness over dumping, punitive tariffs or military commitments to defend Taiwan. In short, little to disturb the flow smiling photo ops and prolonged handshakes.
While the US president has experienced domestic defeats, his inability to push through his repeal and replacement of Obamacare, and his tax reform bill languishing, he has deployed his presidential bully pulpit and executive orders to good effect.
He has told big business not to go offshore if there is no need. Much of the recent movement, has been the result of industrial fashion more than anything else. Instead, he told them amid a welter of carrots and sticks, to set up at home if they possibly can. This message reached the Carrier aircon company and as a result, they retained 1,000 jobs in Indiana. Then Toyota opted to make a US$10 billion investment in the US after a Trump warning.
Of course, times have changed since the days when setting up in China was a slam-dunk solution to cut labour costs. Such decisions are not so obvious today as talk of re-shoring and near-shoring rises in volume. These two have become ways escape the increasingly high wages of rapidly middle-classing Asia, and a method of gaining control over suppliers and supply chains. What's more, rising Asian affluence is creating a new huge market for high-end manufactures from the West.
After the Xi meeting, the US president tweeted that Beijing would get a better trade deal with Washington if it helped resolve the US problem with Pyongyang, which also signals a racheting up of tensions with a volatile and vituperative North Korea.
Such statements have created unease in the US business community, which feels it should not be used as a "bargaining chip", said James Zimmerman, a Beijing-based lawyer and the former chairman of the American Chamber of Commerce in China.
"Trump's 'far better trade deal' linkage to North Korea is amateurish, illogical horse trading, at best," said Mr Zimmerman, according to Reuters.
Still churlish, the serving American Chamber chairman William Zarit said: "We'd rather be talking than having a trade war. But remember we've been talking for 20 years and haven't gotten very far."
Said APCO consultantcy chairman James McGregor: "If you look at things China talks about opening, it is in areas where China needs help."
More pleased than irritated, US Meat Export Federation president Philip Seng told Reuters: "We are pleased to hear the issue has been elevated to the highest levels of both governments and that there is commitment to resolve the US beef access issue in an expedited fashion."
China has purchased hardly any American beef since it conditionally lifted an import ban last year imposed in 2003 due to a case of mad cow disease in Washington state.
Despite initial media reports suggesting Xi may have offered access for US beef as a concession to stave off rising trade tensions, China's Premier Li Keqiang this week appeared to link progress on the issue to US restrictions on imports of some Chinese poultry products for food safety reasons.
"China is willing to import market-competitive US beef that meets quality and health standards," Mr Li told a US Congressional delegation in Beijing, according to state-run Beijing News.
"Chinese chicken is also very competitive in the international market. We hope the United States can quickly lift the ban on Chinese chicken imports. Only in this way can we better embody fair trade," said Mr Li.
While individual companies are hesitant to criticise China for fear of backlash, critics from American business groups accuse Beijing of unfairly subsidising domestic firms and restricting foreign investment into much of the world's second-biggest economy.
A 50 per cent ownership cap for foreign life insurers, for example, despite China's 2001 World Trade Organisation commitments to lift it, has helped limit their market share to about six per cent.
Beijing has repeatedly promised to open up financial services more widely to foreign firms, but has not said when. "There are lots of ways China can call something an opening when it is not," said US-China Business Council vice president Jacob Parker.
Another problem is currency manipulation. Five years ago, one US dollar bought 6.3 yuan. Today, one dollar buys about 6.9 yuan, which makes Chinese imports less expensive in US markets.
But there are signs that the Chinese government is finally listening to calls for a fairly valued currency, even if it means taking steps to prevent it from falling too sharply against a strengthening US dollar.
Said Cornell University economics professor Eswar Prasad: "For the past two years, the Peoples Bank of China has been intervening in currency markets to prevent the renminbi from falling too sharply in value against the dollar.
"China has, if anything, been doing the US a favour by not letting the renminbi depreciate as much and as fast against the dollar as the markets seem to want," he said.
But economist Fred Bergsten, of the Washington DC-based think tank the Peterson Institute for International Economics, differed, saying currency manipulation explained most of China's large trade surpluses, which reached a staggering 10 per cent of its entire GDP in 2007.
But since 2014, the situation has changed dramatically, as China stopped artificially deflating its currency, as the growth in the Chinese economy slowed and Chinese investors made more investments outside the country, leading to a drop in the yuan's value in relation to the dollar, as well as a decline in China's reserves, he said.
President Xi proposed further cooperation on infrastructure development in meetings with Trump, but Chinese state-owned companies working on major US public works is a politically fraught issue in the United States, where Trump campaigned on creating jobs.
High-tech industries where China hopes to funnel investment, such as semiconductors, virtual reality and autonomous vehicles, are considered sensitive. Such partnerships would likely also have to clear national security hurdles.
Sceptics also wonder if Chinese cooperation in redressing the trade imbalance will be limited to areas that serve Chinese needs, such as increasing imports of US gas, oil and coking coal.
Countervailing Trump's negative narrative of a Chinese rip-off of American prosperity is recent news that the Middle Kingdom has become the biggest buyer of US crude oil in February, surpassing Canada.
At a time when OPEC is cutting back output, China imported 8.08 million barrels of US light crude, nearly quadrupling its January intake, according to the US Census Bureau.
That helped boost US exports to a record 31.2 million barrels during the month. Canada, the America's biggest trading partner, imported 6.84 million barrels, down 20 per cent from a month earlier.
Long a source of tension between China and the US, the largely containerised distillers dried grain (DDG) has suffered a sudden price collapse because punitive Chinese tariffs, Bloomberg reports.
Spot prices for DDGs in Iowa plunged 47 per cent from a peak last June to $92.50 per short ton, the lowest for the time of year since at least 2007, US Department of Agriculture data show. Prices for dried grains, a corn byproduct that's used in animal feed, have tumbled to the lowest in a decade for this time of year.
China's move earlier in 2017 to impose import tariffs has significantly slowed American exports to the world’s s biggest market.
The woes of DDG sellers highlight the risk of President Trump’s tough stance on trade poses to farmers. Protectionist policies could threaten crop shipments at a time when American grain inventories are piling up.
To be fair, with the exception of the odd bump and grind, Sino-American relations have been good since the terror attacks of 9/11, which some say gave the George W Bush, the only peace his presidency had known, having been embattled much as Trump's has been.
But when 9/11 sunk in, Chinese companies and individuals sent expressions of condolences to their American counterparts. China, being troubled by Muslim separatists of its own, offered strong support for the War on Terror.
China voted in favour of UN Security Council Resolution 1373, publicly supported the coalition campaign in Afghanistan and contributed $150 million of bilateral assistance to Afghan reconstruction following the defeat of the Taliban.
Taiwan remains a volatile issue, but one that is under control. US policy toward Taiwan has involved emphasising the "Four Noes and One Without". On occasion the America has rebuked Taiwan's president for provocative pro-independence rhetoric.
"Perhaps the most significant result of the first face-to-face Trump-Xi meeting was the personal rapport between them and the talk of them becoming friends," suggested the South China Morning Post reporter Cary Huang.
"Such a relationship would help in problem-solving and in preventing sabre-rattling between the world’s largest democracy and its last major communist state - supposedly among its greatest political adversaries," she said. |
