The outlook for US-China trade relations is likely to remain put to the test after this week’s high-level diplomatic talks showed that President Joe Biden’s team has no intention of following the Trump’s harsh tone. government in talks with Beijing completely.
While Washington and Beijing have struck a ceasefire in their tit-for-tat trade feud with last year’s “phase one” deal, representatives on both sides are far from satisfied with the status quo and see the other as a major economic rival.
That game was shown in full on Thursday, when the countries began two days of meetings in Anchorage, Alaska.
Secretary of State Antony Blinken began his remarks by noting that the US “underlines its deep concern about the actions of China, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States. [and] economic coercion against our allies. “
Yang Jiechi, director of the Chinese Communist Party’s Central Committee on Foreign Affairs, said the US “does not have the qualification to say it wants to speak from a strong position with China.”
While the talks were seen as more of a diplomatic than an economic exercise, the spiky exchange of views is likely an early snapshot of the bitter fighting ahead for the Biden trade team. And at stake is one of the world’s most valuable trading relationships.
According to the USTR office, China is currently the United States’ third largest trading partner with a total of $ 558.1 billion (two-way traffic) in 2019. That massive volume of trade supported an estimated 911,000 US jobs as of 2015, of which 601,000 originated. of exports of goods and 309,000 of exports of services.
China is also the third largest export market for American farmers, and its annual agricultural commodity trade was $ 14 billion two years ago. China is the largest supplier of goods imports in the United States.
Clete Willems, a former World Trade Organization attorney at 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 now a current partner at law firm Akin Gump, said the Anchorage meetings were more of an opportunity to broadcast official complaints and less of a realistic attempt at economic remedy.
“I had low expectations for Alaska and those expectations have come true,” said Willems with a tongue in his mouth about the talks.
“I think [the Chinese government] Misread the situation with the Biden team, and they thought these guys would come in and reverse all Trump measures, “he added.” I think they find that it will not. But I think they should hear it directly from Blinken. “
The trade talks with China are of commercial importance, but also provide an opportunity to protect US national security interests and strengthen 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 earths.
“The Biden administration has indicated that trade at all costs is not their position and that they will not curtail their views on human rights or national security (for example) to have a ‘good’ trade relationship,” Dewardric McNeal said. Obama-era policy analyst at the Department of Defense in an email on Friday.
Although Biden’s order did not name China, it instructed agencies to investigate gaps in domestic production and supply chains that are dominated by or run by “countries that are or will become unfriendly or unstable.”
The directive was widely regarded as China, one of the world’s largest exporters of rare earth metals, a group of materials used in the production of computer screens, state-of-the-art weapons and electric vehicles.
US Secretary of State Antony Blinken (2nd R), accompanied by National Security Adviser Jake Sullivan (R), speaks to Yang Jiechi (2nd L), Director of the Central Foreign Affairs Commission Office, and Wang Yi (L), China’s Foreign Minister at the opening session of the US-China talks at the Captain Cook Hotel in Anchorage, Alaska on March 18, 2021.
Frederic J. Brown | AFP | Getty Images
Still, Chinese negotiators, including Secretary of State Wang Yi, were perhaps hoping for a warmer reception from Blinken after a tumultuous four years under President Donald Trump and his top diplomat, Mike Pompeo.
The Trump administration made it a practice to impose criminal charges and sanctions to address ongoing complaints about China’s lack of intellectual property protection, required technology transfers, and other unfair trade practices.
“The Biden team understands the complex interrelationships of trade and commerce between the two countries and hopes to be more focused and predictable in identifying and managing problems and concerns (more surgical and less totally destructive) in competition and collaboration,” McNeal , a senior policy analyst at Longview Global, added Friday.
As of Friday afternoon, the US team in Alaska had taken no steps to ease limits on US sales to Chinese companies, including telecommunications giant Huawei, relax visa restrictions for Communist Party members, or reopen the Chinese consulate in Houston.
Negotiations with Beijing will likely prove to be a top priority for recently confirmed US Trade Representative Katherine Tai.
The Senate’s unanimous vote to confirm her nomination, a first for the Biden administration, reflects a twofold belief in her skill as a savvy and skilled trade attorney.
“Katherine Tai is just the kind of qualified and regular person who is in a position to serve President Biden and the country quite well,” Mitch McConnell, Senate minority leader, said ahead of the confirmation vote earlier in March.
Katherine C. Tai addresses the hearings of the Senate Finance Committee to investigate her appointment as United States Trade Representative, with the rank of Ambassador, in Washington, DC on February 25, 2021.
Bill O’Leary | Swimming pool | Reuters
Tai will soon face a litany of trade disputes filed by the Trump administration, but is expected to make talks with Beijing a top priority.
She and her team are expected to review Trump’s lingering policies, including tariffs on Chinese steel, aluminum and consumer goods, as well as parts of the phase one 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 at the WTO with Tai. He added that it will be important for Tai to certainly serve as a 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 put a lot of oxygen into US policy in general. That.”
CNBC’s Nate Rattner and Yen Nee Lee contributed to the reporting.