US and China find some common ground on trade
Concessions on beef, 'Belt and Road' let both sides claim gains
TAKESHI KAWANAMI and ISSAKU HARADA, Nikkei staff writers
WASHINGTON/BEIJING It was only months ago that the world's two largest economies seemed headed toward an open trade war. Now, China has agreed to import American beef and open up to U.S. financial services in exchange for Washington's cooperation on building a continent-spanning economic zone.
"This is more than has been done in the whole history of U.S.-China relations on trade," U.S. Commerce Secretary Wilbur Ross said on May 11, calling the trade deal revealed that day a "Herculean accomplishment."
The 10-point initial agreement is part of a 100-day plan to resolve trade imbalances, laid out by Presidents Donald Trump and Xi Jinping during their summit in early April. The deal fully lifts a Chinese ban on U.S. beef, imposed due to fears of mad cow disease. It also grants more access to American credit ratings agencies, bond underwriters and other financial businesses.
Meanwhile, the U.S. will support Chinese procurement of liquefied natural gas. Washington also sent representatives to China's Belt and Road Forum on May 14-15 -- an international conference about Beijing's plans to build an economic zone stretching to Europe and Africa by land and sea.
It took far fewer than 100 days, since Trump and Xi wrapped up their summit on April 7, to produce these results.
GOOD OPTICS As a candidate, Trump had promised to label China a currency manipulator and slap a 45% retaliatory tariff on the country's exports. But the two sides have been finding common ground on North Korea, and now they are deepening economic ties as well.
From Trump's perspective, the arrangement is a step toward fulfilling another big campaign promise -- to eliminate trade imbalances. It also does not hurt to have a diplomatic victory to distract from his abrupt dismissal of his FBI chief, James Comey.
Beijing also has much to gain. For one thing, the arrangement upends the idea that the U.S. and China will launch a trade war, Vice Commerce Minister Yu Jianhua said on May 12.
For Xi, a stable bilateral relationship is the top foreign policy priority heading into this fall's National Congress of the Communist Party. Not only did he achieve visible progress on that front, he also brought Washington on board his Belt and Road Initiative.
The opening of the mainland China market to U.S. beef and financial services may seem like a painful concession at first glance, but Beijing may in fact have gotten the better end of the deal. It had already decided to lift the import ban on American beef in September, before Trump was elected. All China did was save the initiation of imports for the next administration.
The opening of the bond market could bring in U.S. institutional investors, which may stem the capital flight that troubles the Chinese government.
JUST THE BEGINNING The current agreement, of course, only scratches the surface of bilateral issues. For example, it does not address China's dumping of excess steel and other areas of concern in Washington. The governments also said on May 11 that they will open a Comprehensive Economic Dialogue this summer with the aim of working out a yearlong plan.
American beef and LNG exports alone will do little to close the U.S. trade deficit with China, which has ballooned well past $300 billion for each of the past few years. Ross said the coming trade negotiations will touch on at least 500 items.
Japan and the U.S. also held economic talks last month in Tokyo. In those discussions, too, the American side sought to craft a preliminary 100-day plan, but Japan apparently refused.
Later, Ross said the U.S. "can no longer sustain" the swollen trade deficit with Japan.
But with China, which accounts for half the U.S. trade deficit, Washington is now adopting a starkly different attitude. Ross's Department of Commerce predicts the gap will improve within the year. If the two titans become more allied economically, it could also affect the bilateral free trade agreement the U.S. seeks to forge with Japan.