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US-China trade talks: What to expect
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IANS | 09 Oct, 2019
Chinese and US trade representatives at the highest levels of government
are readying to meet in Washington DC on Thursday for the two countries
13th round of negotiations. Both sides have raised import duties on
billions of dollars worth of each other's goods after US began the fight
and each one is ratcheting up the pressure ahead of the coming meetings
against a tumultuous political backdrop in the US where an impeachment
inquiry into President Donald Trump is raging.
IANS interviewed
Richard Nephew, author, "The Art of Sanctions" and Research Scholar at
the Columbia University School of International and Public Affairs about
the trajectory of the trade talks, and what it means for countries who
have a ringside view of the US-China face-off and are waiting to step in
and profit.
Highlights from the conversation are below:
IANS:
In your latest Brookings paper, you say that "the events of the last 10
years suggest that Chinese economic sanctions policy is at an
inflection point -- both in terms of capabilities and readiness". What
does this mean for US and China and for countries that are standing by
and hope to profit from the impasse?
Richard Nephew: "I think
the thing that has shifted most is that China is a lot more capable and a
lot more willing to use economic tools in order to get its own way in
foreign policy. This is something the United States has been doing for a
number of years, we've seen this with regard to sanctions policy going
back 30-40 years.
But for China, over the course of the last
50-60 years, they have emphasized mostly economic integration and
getting access to the rest of the global economy for development
purposes. Now, they're starting to see that they can use their access
for foreign policy power, that changes things considerably. It means
that the Chinese are going to have not only the ability to influence
events around the world, but also the desire to use their economy to
their advantage.
So for a US president who's looking to make
decisions, they're going to have to start anticipating that when they
impose sanctions on China, for instance, for doing business with Iran
and buying Iranian oil or doing business with Venezuela, that China
might turn around and say, well, fine, we're going to impose sanctions
on your companies for doing business in Taiwan, we're going to impose
sanctions on your companies for doing business with people we don't
really like or trust in Hong Kong. And you can even imagine other
scenarios that could emerge.
All of those situations are going
to create real policy challenges. A US President is going to have to
decide whether or not it's worth taking on the Chinese in particular
areas and of course for the countries are going to be affected on the
periphery."
IANS: You speak of the US' vulnerabilities that China
is well-positioned to target -- rising income, inequality and other
social ills; an overleveraged corporate sector; and "unsustainable"
public debt. So, do you see this adding muscle to China's new approach
towards sanctions not as a response but as an instrument of affirmative
policy? How, specifically?
Richard Nephew: I think the Chinese
are going to be a lot more able to target those vulnerabilities because
they happen to be where China is itself strong. The US needs access to
China for markets when you access to China for markets of goods that are
particularly produced the United States, including high end
intellectual property, and those sorts of things. And we need access to
China because there are a large and burgeoning middle class that should
be buying things that we wish to sell. And all that means is China needs
us but we need China. And if the Chinese decide that they're going to
close off their economy to keep US companies out that's going to affect
political decision making inside of the US.
It has to because
the US is got obvious clear economic interests, that are going to be
potentially at stake. What it comes down to is the degree to which
China's prepared to absorb cost itself. The Chinese didn't start the
conflict with the US or the President, but they are fighting it. And I
think they're learning a lot of valuable information about where the US
is politically vulnerable, and how they can apply pressure on each one
of those vulnerabilities.
IANS: You say that US allies and partners are vulnerable to China even where the US is not. Could you explain?
Richard
Nephew: Sure the US may have vulnerabilities to China, but other
countries are far more vulnerable, in part because their economies are
smaller, and potentially much more dependent on the business
opportunities that are available in China.
South Korea is a
classic example of this. From the experience a few years ago, when they
agreed to have a missile defense radar stationed in the country in order
to deal with the threat from North Korea, the Chinese didn't like that
very much, they thought it was a threat to them in their own deterrence.
And so they decided to restrict access of Chinese tourists going to
South Korea, as well as investment in business activities with self
creating chains that were operating inside of China, imposing real
economic costs on South Korea, and potentially creating a course of
foreign policy with respect to the South Koreans.
This is the
kind of exposure that could potentially occur in hundreds of different
places, and with with dozens of different countries, because of China's
broad base global investment and development strategy. So all that
means, though, is that countries outside of the United States are going
to be vulnerable, but their interests are potentially US interests. And
so if they decide that they need to come to the US and say, please help
us deal with this situation, or please stop doing whatever you're doing,
that's hurting and upsetting the Chinese in a way that we will not get
hurt and upset ourselves, that is going to again affect us.
It
doesn't mean the US will or won't do certain things. But it does
increase the number of data points the amount of decisions that need to
be taken by the United States when we choose to use economic tools that
affect China or other strategic steps that might raise the possibility
of a Chinese sanctions response.
IANS: Investment bank research
teams have begun putting out studies on how many billions of dollars
worth of trade could move out. How complex is that? What could be the
wrinkles?
Nephew: The biggest wrinkle, of course, is the Chinese
interest. Right? You know, we sometimes think about China, as wanting to
just use its power, you know, in all circumstances. That, of course,
isn't the case. And the Chinese economy right now is faltering, in no
small part because foreign business activity has slowed down. The fact
that they spend a lot of money building apartment blocks that no one's
living in as part of the glut in money that they had in the country. So
from that standpoint, the Chinese themselves have got some
vulnerabilities that probably aren't being anticipated by people who are
worried about what China could do. And they don't fully appreciate that
China doesn't want to do these things, either. That's wrinkle number
one.
Number two, of course, is that as many banks, investment
firms and companies find, if you're not doing business in China, where
are you doing business? Now, obviously, India is a place where you could
potentially do some business and other emerging markets where you could
spend a lot more time energy and money. But for a number of
multilateral banks and companies, you know, they have interests and
investments in China for a reason. And I think they want to try and
maintain those, to the extent possible.
So there's definitely
potential for China overstepping how it could use its own tools. And I
think the Chinese are sensitive to that. And I certainly think that
companies and banks and scholars like myself might be overestimating how
much the Chinese could do. But that doesn't undermine the fundamental
point, which is that China's in a much more of a position of a powerful
country that can use these tools, rather than just having to take what
it gets from everybody else.
IANS: Chinese officials have not
commented on a report that Chinese negotiators are seeking to limit the
scope of the talks but this is certainly in the mix, we can see the
effects on the markets. What's the strategy if it's true?
Nephew:
I think there are two things that the Chinese are thinking about right
now, one, they didn't start this fight, and they weren't really excited
to have in the first place, I think they would be satisfied if the trade
talks resulted in a let's go back to where things were in January of
2017. If you're China, that's a perfectly acceptable outcome. Trying to
limit the scope could involve just simply that let's not try and solve
some fundamental systemic problems, like with regard to intellectual
property or broader economic rights and investment rights that
countries, including US would want to have in China. I think from that
standpoint, it's totally advantageous to the Chinese to try and limit
the scope of those talks.
I think what's potentially problematic
for Chinese perspective is if you don't take advantage of this
opportunity to settle some issues, it just means you're going to have
this problem come back up again. And a number of the people who are
running for president in the United States have already indicated that
they intend to continue with the least some of the Trump
administration's approaches with regards to trade disputes with China.
So I think they may be advantaged if they try and get a better deal from
the Trump administration in the next year than if they hold out for
future administration and United States. So that way, you can at least,
you know, get the Chinese economy back to where it was before this whole
thing started.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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