China-US Phase 1 Agreement: A Positive Spillover for the World

US President Donald Trump and Chinese Vice Premier Liu He have signed a Phase 1 trade deal. Cooperation between China and the USA is a necessary condition for the world economy to prosper, though not a sufficient one, Wang Yiwei, Director of the Institute of International Affairs and Centre for European Union Studies at Renmin University of China, told valdaiclub.com in an interview. 

Is it possible to hope the trade war between the two countries is over and will be followed by more stability in global trade and the world economic order? 

The agreement between China and the USA is a good thing for the world. As the biggest economies in the world, the joint initiatives, such as the protection of intellectual property rights, bank regulation, etc., will promote economic reform globally, and lay the foundation for a new round of WTO reform and negotiations on the rules of trade. The EU will benefit from it too. Because the trade war may help the USA understand the limitations of using tariffs, hence they will be less frequently used against Europe. Growth, investment and consumption expectations will become more stable, thanks to the agreement. 

How would you comment on the first phase of the trade agreement between China and the USA? President Trump claims that “this is the biggest deal that anyone’s ever seen”. Is the agreement good for China despite tariffs on hundreds of billions of dollars of Chinese imports remaining in place? 

The products China will purchase from the USA are those which are competitive in China’s domestic market, such as agricultural products. If there are more competitive products exported from Europe, they will be able to find their place in the Chinese market. In fact, the domestic demands of China are expandable. For exports to China, the relationship between Europe and the USA is not necessarily a zero-sum game because China’s market is big enough. 

The USA wants to preserve all tariffs while China hopes that they can be lifted in their entirety. Both propositions are unrealistic. A suggested approach is that the tariffs shall not rise in the future and be gradually lifted. This will help stabilise the expectations of the world. 

The main reason why China’s economy growth has slowed down in recent periods is its economic transformation. Its industry is in the process of updating, but some corporations and local officials haven’t adapted to it. Due to the “green” transformation, some companies have closed their doors. The tariffs are not a very significant problem for China’s economy and during the next phase, they may be wholly cancelled. 

Additionally, the agreement states that there will be political and economic dialogues every half a year. It means that the dialogues between China and USA have been restored back to normal.

Hence, overall, the agreement will bring positive spillover effects to the world. The cooperation between China and the USA is a necessary condition for the world economy, albeit not a sufficient one. 

Beijing has agreed to “greatly expand” the volume of products it buys from America (more than $200bn, and by “much more than $50bn” over the next two years). Will this agreement hurt Brazil and other exporters of agricultural products to China? 

It is true that the domestic markets of China in certain areas are currently limited. Likely, less soybean and beef will be imported from Brazil. 

But more importantly, the products of America, Europe, and Brazil have their respective competitive advantages and China’s market still offers huge potential. For instance, as a traditional liquor-consuming country, China is the biggest wine importer in the world now. It means that as long as the quality and commercial model are acceptable for Chinese consumers, there is a possibility for any product to have a share in China’s market. For example, tourism and e-commerce will help corporations that want to enter the Chinese market. The important thing is that your products must be competitive. 

China’s ‘Made in China 2025’ plan is under pressure from the USA, as are several globally competitive Chinese companies. The most notorious case is Huawei. Germany and Britain are under Americaт pressure to not buy Huawei’s equipment because of security reasons, which has ruined market competition. MI5 chief Anthony Parker recently said that US intelligence sharing would not be jeopardised if the UK used Huawei. 

The UK has put it frankly that there is no proof that Huawei poses a security problem, and the US cannot offer any substitute. Hence, the consequence of its refusal to use Huawei is that the UK will fell behind, which isn’t in its interests. 

Now there has been a deal between the UK and Huawei to specify the issues the US cares about. If the US refuses to acknowledge it, then this means the US is using gangster logic. Its overreaction to Huawei also underscores its own practice of monitoring other countries, including its allies. 

But we do not know yet how long the UK, or Germany, can act independently, given that they have relied on the US for too long.

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Expert Opinions

At the moment, China is the only country that has a vision for the world. In 2017, President Xi Jinping presented in the UN that vision, which he called the “community of human destiny.” Is it possible to establish that community when the US is pursuing outdated military and geopolitical primacy? 

There are three dimensions to understanding the Community of Shared Future for Mankind (CSFM): historically, activating shared traditions of lasting peace and common security; Presently, shaping common prosperity and an open/inclusive international system; and in the future, building a green and sustainable world, and seeking a global dynamic consensus through an AI revolution and a global commons. The Community of Shared Future for Mankind is also re-orienting the Chinese Communist Party from revolution to construction, and from internationalism to globalism. 

It is rooted in Chinese traditional he/he (和合, harmony) culture and goes beyond the European approach of high standards (rigid uniformity and sovereignty transferring) as well as the US approach of exclusiveness, and instead pursues a modern, human-centred doctrine while seeking out common or shared values among all nations, NGOs, etc. 

We call it the Community of Shared Future for Mankind. Of course, Americans constitute a very important part of mankind. Without the US, it cannot be named so. But China knows that there are difficulties in reality. America thinks religiously but the concept is different from religious thinking modes. Besides, there are a sense of supremacy and an America-centred worldview in the USA, but the Community of Shared Future for Mankind is decentralised, as exemplified by the BRI. We understand that what the USA opposes is not the content of the BRI, but the fact that it was initiated by China. Nevertheless, the world in the future will be decentralised and interconnected. The decline of America is the result of the transformation of the world. China is just the scapegoat for US politicians. 

China’s global objectives are a sustainable multipolar world, the reform of the WTO, the implementation of the Paris Climate Agreement, and pursuing the international nuclear disarmament regime. Could China work constructively with the EU in pursuit of those objectives? 

Europe is indispensable to China’s objectives. For instance, China and Europe both worked hard for the Iranian Nuclear Deal, although it has been destroyed by the USA. China and Europe have a different understanding of multilateralism, but it will not hinder their multilateral cooperation. Confucius once said that the noble men emphasise what is common, while snobs focus on what is different. 

In terms of climate change, China’s conscience has gone beyond that of Europe and the USA. Both the Americans and Europeans seek to preserve their lifestyles and their mode of production. But for the objective, the Chinese have not only changed their mode of production and lifestyle, but even their thinking style. In the context of China, “green” contains more content higher pursuit than the term “eco-friendly” in the context of Europe. Even finance and lifestyle can be green. 

China has upgraded its primary modernisation to pursue high quality, and there will be 1 billion middle class citizens. That means, it isn’t just China’s need, choosing sustainable development, but also a contribution to the world. 

China has appointed vice-minister-level officials to help reform the WTO. America thinks that it is dead, while China believes that it is still alive, is able, and should be cured. Only after being cured can the WTO grow and play a role. The US refuses to do so, hence the major responsibilities are on the shoulders of Europe and China. Europe is crucial in the process for that it is an ally of the USA and is able to provide direct advice to the latter. More achievements can be made when the BRI is connected to the UN’s Sustainable Development Goals as part of the concept of CSFH.

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Expert Opinions
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.