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Foreign Policy

Osaka Shows Dispute Management Is Key to China-U.S. Ties

Jul 05 , 2019
  • Su Xiaohui

    Deputy Director of Int'l & Strategic Studies, CIIS

On June 29, Chinese President Xi Jinping and his US counterpart, Donald Trump took time to speak in-depth and exchange views when they met on the sidelines of the G20 summit in Osaka, Japan.

The intentions for the meeting had been set when the leaders spoke over the phone on June 18, 2019. President Xi said he would be ready to meet with President Trump during the G20 Osaka summit to discuss the development of China-US relations, especially on trade. President Trump added that the entire world hopes to see the US and China reach an agreement.

Indeed, quite a few countries have expressed their concern that the intensifying trade war between the US and China could lead the relationship to get out of control.

At Osaka, the two countries were able to reach a positive agreement on several key economic and trade issues. Chiefly, the US said it would not add new tariffs on Chinese exports. The two leaders also agreed to restart economic and trade consultations based on equality and mutual respect. Dedicated economic and trade negotiating teams from both sides would discuss specific issues further.

This series of agreements comes as no surprise. Though Trump bragged that trade wars are “easy to win” and made a show of doubling down on his “maximum pressure” approach by increasing tariffs on $50 billion and $200 billion of Chinese goods, the attempts to pressure China into accepting biased conditions failed. Trump’s tariff hikes and aggressive policies have done more to harm the US than China. Going into the negotiations, Trump had to shoulder the anxieties and dissatisfaction of his public and of the country’s industry leaders who rely on Chinese trade. The status of the world economy and global trade were also uncertain given Trump’s ill-advised aggression. This past April, the IMF cut its 2019 growth outlook again, saying that the risks to the global economy “skewed to the downside” given ongoing US-China trade tensions. Throughout the 18-month standoff, China made a show of sticking to its principles. Though far from seeking a trade war, China made it clear that the country does not fear one. In response to Trump’s moves, China carried out prompt and accurate counterbalance measures, such as retaliatory tariffs on US agricultural products that caused remarkable pressure on the Trump administration.

However, the most recent Xi-Trump meeting did not merely aim at trade frictions. The China-US dispute in recent years has been about much more than trade, and the Osaka meeting provided a critical opportunity for the two major powers to get back on track. During the Obama administration, the US publicly agreed with China that a zero-sum game would harm both sides’ interests and that the US needed to cooperate in order to avoid the Thucydides Trap. Currently, it is of greater importance for both sides to talk about dispute management, since the two countries are highly interdependent and genuine decoupling is unrealistic.

Even though President Trump focused on trade at the Osaka meeting, President Xi made a point of proposing that bilateral ties be built in a comprehensive way. At the beginning of their meeting, Xi recalled the birth of “ping-pong diplomacy” in 1971 in Nagoya, Japan, where Chinese and US players had friendly interactions at the 31st World Table Tennis Championships. Eight years after that, in 1979, China and the US formally established diplomatic relations. Today, at the 40th anniversary of the relationship, it is time to review the two countries’ mutual achievements and difficulties. The most recent leaders’ meeting did just that: it played a pivot role in strengthening bilateral ties and set the direction for the China-US relationship moving forward. Both countries agreed to advance the relationship based on coordination, cooperation, and stability.

However, the relationship still faces challenges. First, both sides will need to confront the difficulties in living up to the negotiation. US Treasury Secretary Steven Mnuchin said after the meeting that the trade deal between the US and China was “about 90%” completed, but it is clear that the remaining 10% consists of the genuinely tough issues. Teams from both sides will have to work on these items with courage and caution. Second, the uncertainty and aggression of US policies remain the main obstacles for the negotiation. Given that conservatives still play a leading role in US politics, and that these policy makers and their consultants tend to view China as a rival, the two countries may still struggle to achieve consensus. Third, miscalculation poses serious risks. Both countries should respect each other’s core national interests. President Trump reiterated his support for the “one China” policy during his talks with President Xi, but it would be dangerous for the US to try to push too far on Taiwan policy.

As one of the world’s most important bilateral relations, the China-US relationship does not only have influence over the development of the two countries, but it also affects the global strategic balance. While it is unlikely that the two countries will see eye to eye on every topic, it is of critical importance to all that the two countries reasonably manage their disputes.

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