After trade disputes and precarious negotiations, Washington and Beijing are considering a new mechanism to regulate their commercial exchanges. Is it time to ease tensions? After a battle of tariffs and fragile negotiations, the United States and China are considering a new mechanism to regulate their trade. Some observers fear it may distort free competition, while others see it as a way to pave the way for a more peaceful coexistence between the two top global economic powers. Here are some key explanations of the ongoing work before a hypothetical meeting between Presidents Donald Trump and Xi Jinping.
What is it about?
Following a meeting on March 15 and 16 between top American and Chinese economic officials in Paris, White House Trade Representative (USTR) Jamieson Greer indicated that the creation of a “Trade Committee” between the US and China was discussed. According to him, it would be a hybrid mechanism to formalize and determine “what types of products” the US should export to China and vice versa. Wendy Cutler, Vice President of the Asia Society Policy Institute, believes that this committee could evaluate the possibility of increasing trade in non-sensitive products or discuss a mutual reduction of tariffs in non-strategic sectors. She notes that officials seem to be making progress in unlocking purchasing commitments from China (agricultural products, energy, aircraft).
Is this new?
Chad Bown, from the Peterson Institute for International Economics, sees it as a form of “regular trade”. He cites the example of Japan voluntarily limiting its car exports to the US in the 1980s. More recently, during Donald Trump’s first term, Washington and Beijing signed an agreement in which China committed to importing more American products worth $200 billion over two years. This commitment did not materialize.
Why is this causing concerns?
Joerg Wuttke, associated with the consulting firm DGA-Albright Stonebridge Group, warns that instead of removing regulations, reducing tariffs, and allowing companies to more easily decide what to sell and at what price, the system would become more bureaucratic. He questions, “Where are the laws of the market?” He believes this approach could reduce competitiveness and annoy other countries. An anonymous American business leader wonders how the government will prioritize companies and favored sectors if it controls trade.
Will the relationship improve?
According to Chad Bown, the new mechanism could be more successful than previous attempts to smooth out their trade disputes. He suggests that since the old system wasn’t working, perhaps trying something new could lead to a more sustainable relationship, rather than perpetual conflicts resurfacing. However, for it to work, the agreement must be acceptable and realistic for both parties. Bown warns that both sides must genuinely commit, and even then, it will be extremely challenging.
