Signals from Shanghai will point the way for trade deal hopes

Signals from Shanghai will point the way for trade deal hopes

Cui Tiankai, China’s ambassador to the US, last week welcomed the impending visit of Robert Lighthizer, the US trade representative, and Steven Mnuchin, the Treasury secretary, to his hometown of Shanghai — suggesting that the port city was the right venue to coax Washington and Beijing towards a trade deal.

Mr Cui, who joined Twitter this month in a bid to engage with “more American people”, said Shanghai was a “witness of many historical moments, pioneer of reform and opening up”. He added: “Hope progress will be made on the basis of equality and mutual respect and US colleagues have the chance to explore the city.”

His conciliatory words reflect the easing of tensions in the US-China trade dispute that followed the latest truce struck by Donald Trump, the US president, and Xi Jinping, his Chinese counterpart, at the G20 summit in Osaka in June.

There have been some goodwill gestures from both sides in recent weeks that have helped to keep the ceasefire in place. China is firming up its commitments to buy more US farm products, while the Trump administration is speeding up the processing of licences for its companies selling to Huawei, the Chinese company at the centre of a US-China tech war. The US has also announced it will grant tariff waivers for some Chinese imports in the industrial sector.

But as the countries’ negotiators head into this new round of talks, hopes of any big breakthrough are limited.

Many of the reasons why negotiations fell apart in early May in the twists and turns of the dispute are still unresolved, including China’s commitments on intellectual property and forced technology transfer.

There is also no firm deadline to focus negotiators’ minds this time. After the first big truce between Mr Trump and Mr Xi following last December’s G20 summit in Buenos Aires, Washington and Beijing knew they had little time to spare to avoid the US increasing tariffs from 10 per cent to 25 per cent (the talks did collapse, and the tariffs were put in place).

There is no scheduled tariff increase this time — and it is uncertain that Mr Trump would be prepared to bear the domestic fallout from slapping 25 per cent tariffs on all remaining Chinese imports, worth $300bn. So in a way, the pressure is off.

Nonetheless, there are a few things to watch for in the Shanghai talks. One is whether Mr Xi will make an appearance — that would be a sign that Beijing is angling for an agreement, and not just playing for time, which is what Mr Trump suggested on Friday when he said China might wait until after the 2020 election to make concessions.

Another thing to watch for is whether a visit of Chinese officials to Washington is scheduled, to build on whatever progress is made in Shanghai.

But on Tuesday Mr Trump suggested even limited momentum might be elusive. In a tweet he said there was “no sign” of the farm purchases Beijing was pledging.

“That is the problem with China, they never come through.”

US turns up the heat on the WTO

The Trump administration just won’t stop turning the screws on the World Trade Organization.

On Friday it sharply increased its criticism of the Geneva-based trade body for allowing countries to claim developing status which entitles them to preferential benefits and flexibility in adhering to the rules.

The US’s biggest gripe is clearly with China, but it has also taken aim at South Korea, Mexico, Singapore, the United Arab Emirates and others.

In a separate attack on the WTO’s dispute settlement mechanism, the US has already blocked the appointment of judges to the organisation’s appellate body. But Washington has less clear-cut ways to express its displeasure over countries’ “developing” status. It has vowed not to recognise their status nor support their membership of the OECD unless there are changes — but this may not hold much weight.

In reply

Here in Brussels, EU officials are watching the outcome of the US-China talks with some nervousness, and might be forgiven for hoping they don’t necessarily reach a swift and successful conclusion, writes Free Trade co-author Alan Beattie.

There is a fear that if Mr Trump reaches a deal with China, that will free up time and space for bashing the EU instead. The (already postponed) deadline for assessing whether imports of cars from Europe constitute a national security risk is in November, which would provide a reason for Mr Trump to pivot from one trade war to another.

It was not a comforting sign that at the end of last week he threatened to put tariffs on French wine in response to France’s planned digital tax, adding that he preferred American wine anyway. Mr Trump is a teetotaller, which suggests strongly to Europeans that his wine appreciation is no more evidence-based than anything else he does.

Chart choice

Global trade is being hit hard — (and just look at Singapore — second chart in link). From Deutsche Bank 

Number of the week

13 per cent: the share of global goods exports from China — cited by Mr Trump as he fired off a letter to the US trade representative’s office asking it to crack down on Beijing’s status as a developing economy at the World Trade Organization.

Further reading

A flavour of 2020: Elizabeth Warren, US senator and Democratic presidential hopeful, releases her trade plan

Liz Truss, Britain’s international trade secretary in Boris Johnson’s government, introduces herself to the Daily Telegraph (DT)

Not for the first time, Larry Kudlow, the top White House economic official, put the cart before the horse. On currency intervention he said Mr Trump had ruled it out as a tool to weaken the dollar, but the president said not so fast. (BBG)

Can China redirect its exports away from the US? (NYT)

China’s restrictions on garbage imports have had a big impact in India (WSJ)

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