The prospect for US-China trade is likely to continue to be questioned after high-level diplomatic talks this week revealed that President Joe Biden’s team is not planning to use the Trump administration’s harsh tone in talks with Beijing to give up completely.
Although Washington and Beijing signed a ceasefire in their trade feud with last year’s “Phase 1” agreement, representatives on both sides are far from satisfied with the status quo and see the other as major economic rivals.
This competition was seen on Thursday when the countries began two day meetings in Anchorage, Alaska.
Secretary of State Antony Blinken began by stating that the US “would highlight its deep concern about actions by China, including cyber attacks against the United States in Xinjiang, Hong Kong, Taiwan [and] economic constraint on our allies. “
Yang Jiechi, director of the Chinese Communist Party’s Central Foreign Affairs Commission, said the US “does not have the qualifications to say it wants to speak to China from a position of strength”.
Although the talks were viewed as a diplomatic exercise rather than an economic exercise, the prickly exchange is likely an early snapshot of the fierce battles ahead for the Biden trade team. And it is about one of the most valuable trade relationships in the world.
China is currently the US’s third largest merchandise trading partner with a total of $ 558.1 billion (reciprocal trade) in 2019, according to the USTR office. That massive volume of trade supported an estimated 911,000 U.S. jobs as of 2015, with 601,000 from goods exports and 309,000 from service exports.
China is also the third largest export market for American farmers, and annual trade in agricultural commodities totaled $ 14 billion two years ago. China is the largest importer of goods in the United States.
Clete Willems, a former World Trade Organization litigator in the USTR office, told CNBC on Friday that he was not surprised at the lack of progress in Anchorage.
Willems, who was once a member of Trump’s trade team and is now a current partner with the Akin Gump law firm, said the Anchorage meetings were more a chance to officially voice complaints rather than a realistic attempt to take economic remedial action.
“I had low expectations of Alaska and those expectations were met,” said Willems happily of the talks.
“I think [the Chinese government] I misunderstood the situation with the Biden team and they thought these guys would come in and undo all Trump action, “he added.” I think they find out that it won’t. But I think you need to hear it right from blinking. “
The trade negotiations with China are of economic importance, but also provide an opportunity to protect US national security interests and secure access to critical technologies.
Weeks before the meetings in Anchorage, Alaska, the Biden government drafted an executive order directing government departments to review key supply chains, including those for semiconductors, high-capacity batteries, medical supplies, and rare earth metals.
“The Biden administration has signaled that trade at any price is not their position and that they will not curtail their views and neglect human rights or national security (for example) in order to have a ‘good’ trade relationship,” said Dewardric McNeal. An Obama-era political scientist at the Department of Defense said in an email on Friday.
Although Biden’s mandate did not mention China by name, he directed the agencies to investigate gaps in domestic manufacturing and supply chains that are dominated or passed through by “nations that are becoming or becoming unfriendly or unstable.”
The directive has been widely viewed as part of China, one of the world’s largest exporters of rare earth metals, a group of materials used in the manufacture of computer screens, state-of-the-art weapons, and electric vehicles.
US Secretary of State Antony Blinken (2nd R) speaks together with National Security Advisor Jake Sullivan (R) in front of Yang Jiechi (2nd L), director of the office of the Central Commission for Foreign Affairs, and Wang Yi (L), China’s foreigner minister at the US-China talks opening session on March 18, 2021 at the Captain Cook Hotel in Anchorage, Alaska.
Frederic J. Brown | AFP | Getty Images
Still, Chinese negotiators, including Foreign Secretary Wang Yi, may have hoped for a warmer reception from Blinken after four turbulent years under President Donald Trump and his top diplomat Mike Pompeo.
The Trump administration has made it a habit of imposing punitive tariffs and sanctions to counter ongoing complaints about China’s lack of intellectual property protection, required technology transfers, and other unfair business practices.
“The Biden team understands the complexities of trade and commerce between the two countries and hopes to be more focused and predictable in identifying and addressing issues and concerns (more surgical and less destructive), competitive and collaborative,” said McNeal , a senior policy analyst at Longview Global, added on Friday.
As of Friday afternoon, the U.S. team in Alaska had taken no steps to ease restrictions on American sales to Chinese companies, including telecommunications giant Huawei, to ease visa restrictions for members of the Communist Party, or to reopen the Chinese consulate in Houston .
Negotiations with Beijing will likely be a top priority for newly confirmed US sales representative Katherine Tai.
The Senate’s unanimous vote to confirm her nomination, a first for the Biden government, reflects cross-party confidence in her ability as an accomplished and practiced trade attorney.
“Katherine Tai is exactly the kind of qualified and established person who is able to serve President Biden and the country reasonably well,” said Mitch McConnell, chairman of the Senate minority, in the Senate ahead of the confirmatory vote in early March.
Katherine C. Tai speaks ahead of the Senate Finance Committee hearings to consider her appointment as Ambassador of the United States Commercial Agent on February 25, 2021 in Washington, DC.
Bill O’Leary | Pool | Reuters
Tai will soon face a litany of trade disputes instigated by the Trump administration, but talks with Beijing are expected to be a top priority.
She and her team are expected to review Trump’s ongoing policies, including tariffs on Chinese steel, aluminum and consumer goods, as well as components of the Phase 1 deal.
“She knows how to be tough on China and she knows how to do it in coordination with others,” said Willems, who previously represented the US with Tai at the WTO. He added that it will be important for Tai to act as the voice for US trade interests in a government with a deep diplomatic bank.
“You have a government with a very strong secretary of state, very strong national security advisers who are very close to President Biden and who are very oxygen-consuming in US politics in general. And they are going to have to get through that.”
– CNBC’s Nate Rattner and Yen Nee Lee contributed to the coverage.