After a series of tariff battles and negotiations for a fragile truce, Washington and Beijing are considering a new mechanism to regulate their trade exchanges.
Is it time to ease tensions? After a battle of customs surcharges and negotiations for a fragile truce, the United States and China are considering a new mechanism to regulate their commercial exchanges.
Some observers fear that this may distort free competition, while others see it as a way to pave the way for a more peaceful coexistence between the world’s top two economic powers.
Here are some key explanations about 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 representative for Trade, Jamieson Greer, mentioned the creation of a “Trade Committee” between the US and China.
According to him, this would be a hybrid mechanism to formalize and determine “what types of products” the United States should export to China and vice versa.
Wendy Cutler, Vice President of the Asia Society Policy Institute, believes this committee could assess the possibility of increasing trade in non-sensitive products or discussing a mutual reduction of tariffs in non-strategic sectors.
For now, she notes in an analysis, officials seem to be on the verge of unlocking purchase commitments from China (agricultural products, energy, aircraft).
Is this new?
Chad Bown, from the Peterson Institute for International Economics, sees this as a form of “regular commerce.”
He cites the example of Japan in the 1980s, which voluntarily restrained its car exports to the United States.
More recently, during Donald Trump’s first term, Washington and Beijing signed an agreement in which China pledged to import more American products worth $200 billion over two years. This commitment was not fulfilled.
Why is this causing concerns?
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, warns Joerg Wuttke from the DGA-Albright Stonebridge Group consulting firm.
“It’s not a good sign,” he adds. “Where are the laws of the market?”
According to him, this approach could reduce competitiveness and annoy other countries.
An anonymous American business leader questions: if the government controls trade, how will it choose priority companies and favored sectors?
Will the relationship be better?
According to Chad Bown, the new mechanism could be more fruitful than previous attempts to smooth out their trade disputes.
“It is clear that the old system was not working. Could we try something else?” he suggests, emphasizing that a “more sustainable relationship” is better than “conflicts that constantly flare up.”
But for this to work, the agreement must be acceptable and realistic for each of the signatories. “Both parties would need to commit sincerely,” he warns. “And even then, it will be really, really difficult.”
