Japan in Their Own Words (JITOW)/日本からの意見

What Does the US-China First Phase Trade Deal Mean?
WATANABE Yorizumi / Professor, Kansai University of International Studies; Professor Emeritus, Keio University

February 13, 2020
In terms of economic relations with China, President Trump pursues the three goals of reducing the US’ bilateral trade deficit, sorting out the problem of China’s industrial subsidies embodied in the plan “Made in China 2025” and reforming China’s state-owned enterprises. Beyond them lies the hegemonic rivalry on high technology symbolized by the problem of Huawei Technologies, Inc.

On December 13th, 2019, the US and China announced the conclusion of the first phase of their trade and economic deal. Accordingly, the U.S. put off the imposition of additional 15% tariffs worth $160 billion on smart phones and laptop computers made in China. To state the conclusion first, this deal means not “the beginning of the end” but “the end of the beginning” of the U.S.-China conflict. In other words, the partial settlement of the dispute on tariffs is a prelude to the U.S.-China friction and only a preamble to their full-fledged conflict over economic hegemony.

The US cited the figure of $200 billion (about ¥2.2 trillion) as China’s increased purchase from the US, comprising $40-50 billion at the maximum of agricultural products per year plus industrial products, energy, services, etc. China, in contrast, has not mentioned specific figures. Behind this lies the Chinese insistence that expansion of trade should be determined by the market in accordance with the “principle of marketization” and should follow the rules of the World Trade Organization (WTO). Thus China is forestalling the US move to put pressure on China by hoisting numerical targets.

On agricultural products, China apparently offered to import 90 million tons of soybeans produced in the US. This is indicative of the Chinese posture to work towards a “win-win” solution. The Chinese side takes the position that, while China imports agricultural products from the US, the US should also import agricultural products from China as appropriate, and emphasizes “bidirectionality” in the talks.

China has also made known its red line, beyond which it would not give in to U.S. demands. Its State Council announcement declared that China would firmly adhere to the principle of self-sufficiency of grains, and stated “We will keep our rice bowl in our own hands.” Thus, China adamantly upholds its idea of food security.

The Chinese side announced on December 13th that the US would cancel all additional tariffs in stages. However, President Trump said that the bulk of the additional tariffs would be maintained, Thus the 25% additional tariffs imposed from the first to the third rounds amounting in total to $ 250 billion would stay. Only the 15% additional tariff amounting to $120 billion imposed last September was reduced in half to 7.5%. As far as the tariffs are concerned, it seems that both the US and China avoided engaging in mutual accusations and carefully choreographed the appearance of agreement through subtle expressions, thus carrying the settlement over to the second phase.

No clue is yet in sight for solving the problems of industrial subsidies embodied in “China made in 2025” and the reform of state-owned enterprises. Both the US and China seem to have agreed not to mention this publicly on paper, thus in effect “agreeing to disagree”

For China that is bent on maintaining its socialist market economy, “China made in 2025” is a banner that it cannot afford to drop. It is an issue on which the Xi Jinping regime stakes its honor. It should be noted, however, that the State Council announcement stated that the agreement this time is in keeping with the need to promote further the deepening reform and high quality economic development of China. It also said that China would welcome the firms of all countries competing under equal conditions in the Chinese market. It apparently is indicative of their recognition that the negotiation, though conducted under pressure from the US, provided an impetus to push forward economic reform.

Among Chinese pundits, there are many who take the view that in this round, the US and China were able to share a common direction for the talks, that is, seeking to point out mutually the problems each saw in the other, and then working together to find solutions. They would thrash out the issues, with the US focusing its criticism on the excessive production of China’s state-owned enterprises and its policy on market-distorting subsidies, and China taking issue with the low saving rate of the US and its dependence on deficit-covering government bonds. Then they would go on to work together towards solutions. This scheme is very similar to the one adopted for the Structural Impediment Initiative talks launched between Japan and the US in 1989.

Anxious to score points early for the impending presidential election, President Trump will probably hasten to move on to the second phase of the deal. Dangling the prospect of eliminating or reducing the additional tariffs that are still in place, he may well try to pressure China to yield on subsidies and reform of the state-owned enterprises. China, however, is in no hurry to move on to the second phase of the negotiation, and will probably wait and see how the US moves.

As was the case with the Japan-US SII talks, the structural talks between the US and China are likely to take up enormous time and energy. According to a Chinese expert, many of the areas in which there was agreement this time resemble the areas covered by TPP (Trans-Pacific Partnership Agreement). He points out that as it engages in further negotiations with the US, China’s position may come closer in substance to TPP.

If the negotiation with the US can be used as a leverage to push structural reform in China, it is conceivable for China join TPP11. Should that happen, Japan would need to conduct market access negotiations with China. There might even be the option of proposing a bilateral economic partnership agreement (EPA) as a means of gaining the strategic upper hand.

The worst case would be a situation in which the decoupling between the US and China goes so far that Japan is forced to choose between the US and China. To prevent such a situation, it is vital to induce both the US and China to act within multilateral frameworks such as TPP and WTO.

The writer is Professor, Kansai University of International Studies and Professor Emeritus, Keio University. This is a summary of the article which appeared in the January 14th edition of Nihon Keizai Shimbun.
The English-Speaking Union of Japan

渡邊 頼純 / 関西国際大学教授、慶應義塾大学名誉教授

2020年 2月 13日


農産品輸入については米国側が最大で年400億~500億ドル相当、工業品やエネルギー、サービスなどを加えて合計約2千億ドル(約22兆円)という具体的数字を示したのに対し、中国側は具体的数字には言及していない。この背景には、貿易拡大は「市場化原則(principle of marketization)」に従って市場により決定されるべきであり、かつ世界貿易機関(WTO)のルールに沿う必要があるとの中国側の主張がある。数値目標を掲げて中国に圧力をかける米国をけん制している。




「中国製造2025」に代表される産業補助金と国有企業改革については解決の糸口は見えない。両国はこれらに関しては文書で明言しないことで合意したようだ。「agree to disagree(合意しないことについて合意した)」形だ。


「中国製造2025」に代表される産業補助金と国有企業改革については解決の糸口は見えない。両国はこれらに関しては文書で明言しないことで合意したようだ。「agree to disagree(合意しないことについて合意した)」形だ。







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English Speaking Union of Japan > Japan in Their Own Words (JITOW) > What Does the US-China First Phase Trade Deal Mean?