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U.S.-China exchange of trade sanctions, retaliation must halt / Thrash out formula through dialogue

The Yomiuri ShimbunThe United States and China account for about 40 percent of global gross domestic product. The trade war between them brings about grave consequences for many countries. Both nations need to be aware of their responsibility and build up constructive dialogue.

U.S. President Donald Trump and Chinese President Xi Jinping held talks on the sidelines of the summit of the Group of 20 major economies in Osaka. They agreed to restart trade negotiations that have become deadlocked.

Optimism lacking

In May, the negotiations ended without any agreement and the uncertainty about the future of the global economy has increased as a result. The worst-case scenario of the talks breaking down has been avoided for now, and it is possible to say that the situation has slightly improved.

At a press conference Trump said, “China is going to be buying ... agricultural product” from farmers in the Midwest on the basis that Washington will not be imposing additional punitive tariffs on Chinese goods for the time being.

Trump also said he will allow U.S. companies to sell their products to Huawei Technologies Co., China’s telecom equipment giant, against which Washington has levied sanctions.

However, the chasm between the two countries remains deep. As the issues are only being put off for later, how the negotiations will unfold does not warrant any optimism.

The key will be whether Beijing can show effective reform plans in regard to the infringement of intellectual property rights and its opaque practice of providing subsidies to domestic enterprises, both of which Washington has been adamant that China review.

Using subsidies to nurture industries constitutes the bedrock of China’s national strategy to direct economic activities under the government’s initiative. It is unconvincing if China calls for the importance of free trade while keeping these issues on the shelf.

It has also been regarded as a problem that China has forced technology transfers on foreign companies based in the country. Beijing banned administrative bodies and others from overtly forcing foreign firms to hand over their technologies. However, loopholes still exist, so there is much room for improvement.

China will mark the 70th anniversary of the nation’s founding in October. In this milestone year, if the view that Beijing is forced to make a major compromise to Washington prevails, it will tarnish Xi’s pride. This would become a hindrance to the negotiations.

Japan and European nations also criticize China’s policies, such as providing subsidies to domestic companies. China must dispel the sense of distrust among these countries and strive to create an environment in which companies can operate free from anxiety.

Trump, who aims to be reelected November 2020, insists on shrinking the trade deficit. The battle with China over supremacy in advanced technologies and military aspects is intensifying. The U.S. Congress, regardless of party, supports a hard-line stance toward China. It is hard to imagine the United States will easily make compromises with China.

Self-restraint needed

 

However, if the United States merely pursues diplomacy that forces other countries to give in by threatening punitive steps, it is likely to make it more difficult to work out an agreement.

The United States and China have since last summer imposed high tariffs on each other’s imports. In the aftermath, global trade volume has been on a downward trend and business sentiment has deteriorated, conspicuously centering on the manufacturing industry.

The fourth round of punitive steps studied by Washington call for levying additional tariffs of up to 25 percent on goods from China worth about $300 billion (about ¥32 trillion).

Subject to the additional tariffs are familiar goods, including smartphones and clothing, so the impacts will be greater than before. If the additional tariffs are passed on to retail prices, it will be a burden on consumer spending, which accounts for 70 percent of U.S. gross domestic product.

Companies in the world will be forced to reexamine their supply chain networks and plant and equipment investment plans. Depending on the result of talks with China, the United States is poised to invoke punitive measures. But Washington must persistently exercise self-restraint and find a point of compromise.

As a retaliatory measure, Beijing hints at the possibility of restricting exports of rare earths that are necessary for production of high-tech products. The United States relies on China for 80 percent of its rare earths imports. Halting the exchange of sanctions and retaliatory steps is of paramount importance.

Cooperation vital

North Korea’s nuclear and missile development is an issue to be tackled through the cooperation of the United States and China. Xi is believed to have conveyed to Trump the intention of North Korean leader Kim Jong Un, chairman of the Workers’ Party of Korea, who Xi met in North Korea before the G20 summit.

Since the Trump-Kim summit ended without agreement in February, Washington has remained unchanged in its stance of calling for “complete denuclearization” of North Korea. This shows a big difference from the standpoint of China, which approves of a phased denuclearization.

The North seeks the total lifting of sanctions in return for partial abolition of nuclear facilities. As long as Kim has not yet decided on complete denuclearization nor taken any concrete step, it is too early to relax sanctions pressure.

Beijing is called on to exert its influence over Pyongyang in a bid to work toward stabilization of the Korean Peninsula, thereby backing up resumption of U.S.-North Korea denuclearization talks.

A matter of concern is that Trump did not show a positive stance toward bringing up China’s human rights issues.

The international community’s concerns have been increasing over China’s “rule by force” seen in such moves as the “Chinafication” of Hong Kong and crackdowns on the Uighur ethnic minority. Washington must continue to call for the Xi administration to improve its human rights situation.

 

(From The Yomiuri Shimbun, June 30, 2019)Speech



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