U.S.–China Week: Trade confrontation brewing? (2017.11.27)

Welcome to Issue 120 of U.S.–China Week, and greetings from Beijing.

Some exciting professional news: I have signed on as a fellow at New America, where I’m part of a team developing our new DigiChina project to translate and contextualize important developments in China’s digital economy and technology policies. We have four great pieces up so far, and many more to come. Thanks to New America’s Cybersecurity Initiative and DigiChina colleagues for getting us this far, and I’m looking forward to building the effort and collaborating with others in the field. Drop me a line if you have ideas for digital policy issues that need exploration. I remain (newly) based in Oakland, Calif., and continue to also work as a senior fellow with the Paul Tsai China Center at Yale Law School, both on the broad U.S.–China relations agenda and on bilateral issues related to emerging technologies.

Programming note: U.S.–China Week is and will remain on an irregular publication schedule at least until after my return to the United States on Dec. 7. As this project’s third anniversary approaches in February, I am considering changes in format, emphasis, and publication schedule. In this context, I’d be especially grateful for any comments on what’s been most valuable, and what could safely go away, in any future iterations. Thanks to all subscribers for following along with me.

As always: Please encourage friends and colleagues to subscribe to U.S.–China Week. Here is the web version of this issue, ideal for sharing on social media, and you can follow me on Twitter at @gwbstr. Please send your comments, quibbles, and suggestions to [email protected].

TRADE WINDS
Signs of a coming, more confrontational U.S. policy on China trade

  • U.S. Trade Representative Robert Lighthizer’s reported role
    Axios reported that Lighthizer played a central role on President Donald Trump’s trip to Asia, and that he declared the U.S.–China economic relationship “bullshit” at a meeting with National Economic Council head Gary Cohn, Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, and Agriculture Secretary Sonny Perdue—supposedly arguing that the succession of approaches previous administrations have developed with China have gotten nothing done.

    ANALYSIS: Lighthizer’s attitude toward economic ties with China reportedly worries free trade proponents within the administration, but the idea that previous modes of dialogue and policy were not up to the challenge is no Trump administration innovation. The Obama administration’s approach hinged on leverage many thought the United States would gain through the Trans-Pacific Partnership, and then through negotiations toward a U.S.–China bilateral investment treaty. Of course, U.S. participation in TPP is dead for the foreseeable future, and this also removes an incentive for China to play ball on a BIT (even if the U.S. government were interested, which it’s apparently not for now). Any U.S. administration at this stage could be expected to reach for new approaches. What the U.S. public and media should be looking out for is whose interests the Trump approach appears to serve, and at what cost to others.

  • WSJ: Trump team rebuffed Chinese offer to announce financial services opening during state visit; official says ‘no negotiation’
    In a story that provides an excellent summary of the emerging Trump administration approach to China trade, WSJ reported that U.S. officials rejected Chinese offers to announce a limited opening of China’s financial services sector while Trump was in Beijing. One official quoted said:”We said, ‘No, we’re not going to take your gifts because you’re just trying to sucker us.’ … The idea with China is no negotiation because it will just make us beholden to them and reluctant to slam them on other stuff.” The story also reported that trade actions against China are likely to be decided early in 2018, and that some actions may be delayed until after the Republican tax legislation effort concludes.
  • Kennedy: ‘New Washington consensus: China plays unfair’
    Writing in SCMP, Scott Kennedy of CSIS observed: “My sense is that we are on the cusp of a new American strategy in which Washington replaces dialogue and multilateralism with extended unilateral pressure. This U-turn was possibly solidified in July, when the latest round of high-level bilateral dialogue failed to yield anything of value. Since then, the Trump administration has been moving systematically to put the regulatory pieces in place so that it can credibly threaten China with limits on its exports, investment and other elements of the relationship. [Archived copy; original link possibly broken.]
  • USTR investigation result likely in coming weeks, may provide U.S. government with new kinds of leverage
    The conclusion of the USTR’s Section 301 investigation announced in August is likely to emerge in the coming days or weeks, but its conclusion is not much in question. The U.S. government is almost certain to declare that “acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation are actionable.” The question is what actions the U.S. government threatens to take, and what if any are actually implemented. Using the Section 301 tool enables the Trump administration to more credibly threaten China with measures that might go beyond what is allowable under World Trade Organization rules.

    ANALYSIS: Like several other actions by the U.S. government in recent months, the investigation lays the groundwork for implementing measures the Chinese government would find especially unpalatable. The question will be whether the Trump administration uses this increased threat of countermeasures effectively to win concessions, what if any countermeasures it actually implements, and how Chinese officials respond to the threat or reality of new actions. Chinese officials could respond to U.S. measures with sober, procedural efforts for instance at the WTO, or they could employ a range of tactics both quiet and overt to impose costs on U.S. interests. Quiet concessions should not be expected.

#USChinaWeek1967
‘China says U.S. Threatens To Spread War to Cambodia’

“TOKYO, Monday, Nov. 27[, 1967] (UPI)—Communist China accused the United States today of threatening to spread the Vietnam war into neighboring Cambodia. It promised ‘staunch backing’ for the Cambodians if this happened. North Vietnam, in a related development, rejected the recent South Vietnamese offer for peace talks and said the Hanoi regime was determined to ‘fight o the death.””

(Source: The New York TimesThis entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior fellow at the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China relations and technology, and a fellow at New America, where he is developing the DigiChina project on China’s digital policies. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

Free Subscription to U.S.–China Week by clicking here or e-mailing me is open to all, and an archive of past editions appears at my long-running website on East Asia and the United States, Transpacifica.

Contact: Follow me on Twitter at @gwbstr. Send e-mail to [email protected].