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Economy

Xi-Trump Meeting at G20 Sets New Tone

Dec 06 , 2018
  • Li Zheng

    Assistant Research Fellow, China Institutes of Contemporary International Relations

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After several months of preparation, the meeting between Chinese President Xi Jinping and U.S. President Donald Trump during the G20 summit in Argentina came to a successful conclusion. The two sides reached a constructive outcome, which included stopping new tariffs, resolving bilateral economic differences through negotiations, and jointly controlling flows of the opioid fentanyl. These achievements have paused China-U.S. trade frictions that have lasted for nearly a year and created a friendly atmosphere for marking the 40th anniversary of the establishment of diplomatic relations between the two countries.

The outcome of the talks was widely lauded in China and the U.S. and by the international community. Chinese Foreign Minister Wang Yi said that the meeting had achieved an important consensus and laid out the direction of China-U.S. relations in the coming period. A statement issued by the White House also pointed out that the meeting had been very successful. President Xi has been hailed for his wonderful humanitarian gesture of agreeing to label fentanyl a controlled substance. The New York Times commented that the meeting marked a truce in the China-U.S. trade war, which would be good news for overstocked soybean farmers in the U.S.

Compared with the immediate benefits this will bring to Chinese and U.S. markets, the meeting’s greatest significance is that it conveys to the world the important message that China and the U.S. want to stem the current tide of trade protectionism. This meeting of the Chinese and American heads of state and the G20 summit took place at a time of great turbulence in global free trade, and it has landmark significance. WTO Director-General Roberto Azevedo pointed out that international free trade is facing its most serious threats since 1947, and the most basic principles of the WTO are being seriously challenged and questioned. He believes that the model of interactions between China and the U.S. needs to shift from mutual threats and accusations to a search for solutions.

China and the U.S. achieved this shift at the summit. Judging from the outcome of the talks, the two sides reached consensus on at least the following four points.

First, they agreed that escalating retaliatory tariffs are not an effective way of resolving the trade imbalance. As such, the U.S. has halted plans to raise tariffs on $200 billion of Chinese exports. This is a first since the gradual escalation of China-U.S. trade frictions at the beginning of the year. A Chinese spokesperson revealed that the two sides will negotiate the reversal of tariff increases and eventually remove existing retaliatory tariffs.

Second, both sides agreed that specific economic issues should be resolved one by one through technical consultations. The U.S. suggested that the two sides should hold special consultations on forced technology transfers, intellectual property protection, joint efforts to counter cyber theft, and non-tariff barriers within 90 days. This represents a restoration and strengthening of comprehensive economic dialogue between the two countries. Technical consultations between government departments of the two countries under the authorization of top leaders will be key to solving trade issues. Compared to high-level strategic dialogues, technical consultations have a greater chance of achieving pragmatic solutions.

Third, both sides agreed that competition between the two countries should not come at the expense of the wellbeing of their own citizens. The Chinese side promised to increase imports of U.S. agricultural and energy products to reduce the trade deficit between the two countries. It is well known that the U.S. has strong national endowments and competitiveness in energy and agricultural products. China, on the other hand, has a large population and a weak economic base, so it is more dependent on foreign imports of energy and agricultural products. Expanding imports of these products will also help to stabilize domestic prices. This measure aims to separate the structural economic and industrial competition that exists between the two countries from the livelihoods of their citizens, and to prevent the two powers from falling into an all-out economic war.

Fourth, the two sides agreed that trade differences would not be allowed to affect strategic cooperation in other fields. They agreed to promote cooperation in combating abuse of fentanyl and the denuclearization of North Korea. The two sides recognized that bundling the above issues in with trade issues is not conducive to the settlement of trade differences. What is lacking in negotiations between China and the U.S. is not bargaining chips, but a positive atmosphere and the tacit understanding needed to establish cooperation.

Although the above four points are not sufficient to solve many of the new problems that have emerged in the past year, China and the U.S. have solved the stalemate in bilateral interactions. The smooth progress of these talks will also provide inspiration for interactions in the new stage of history.

A major takeaway from the meeting was that the two countries should interact in a way that respects each other and promotes cooperation. Regardless of the actual actions of China and the U.S. in imposing tariffs on each other, the more notable feature of recent hostilities has been the negative impact of their escalating war of words and PR battles on bilateral relations. Disrespectful remarks made by U.S. officials undermined the strategic mutual trust between the two countries, and dialogue between them in various fields assumed an air of suspicion. As a result, there has been an upswell of disapproval and discontent toward the U.S. among the Chinese public, hindering efforts to solve problems through negotiations and exchanges. The leaders and trade teams of the two countries displayed an atmosphere of positive cooperation at the meeting and deliberately avoided sensitive issues that may have displeased the other party. The talks show that as long as the two sides adopt a frank and mutually respectful attitude, there is nothing that cannot be resolved, and confrontation is not inevitable.

Another important takeaway is that China and the U.S. need to set rules for their healthy competition. The 40 years since the establishment of diplomatic relations between China and the U.S. has seen a constant narrowing of the power gap between them. It is undeniable that they are currently engaged in competition in areas such as industry, overseas markets and technological dominance. But weakening one’s opponent is not a reliable means of resolving a competitive relationship. Both China and the U.S. could make competition more constructive by establishing rules they both must comply with, as well as using their rivalry to stimulate innovation and a meeting of minds and to promote the overall progress of human society. The 90-day negotiations between China and the U.S. are an important step in shaping the rules of business between them for the next 40 years.
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