By Associated Press
After 2 1/2 years and 13 rounds of talks, negotiators have yet to tackle one of the biggest irritants for China’s trading partners — the status of politically favored state companies that dominate industries from banking to oil to telecoms.
Europe, Japan and other governments criticized Trump’s tactics but echo complaints that Beijing steals technology and breaks market-opening promises by subsidizing and shielding companies from competition.
Those complaints strike at the heart of a state-led development model Communist Party leaders see as the basis of China’s success.
They are building up “national champions” such as PetroChina Ltd. /zigman2/quotes/205108732/composite PTR +0.33% , Asia’s biggest oil producer, and China Mobile Ltd. /zigman2/quotes/200868736/delayed HK:941 +1.46% , the world’s biggest phone carrier by subscribers. The party in 2013 declared state industry the “core of the economy.”
Outside the state sector, the party is nurturing industrial leaders in solar power, electric cars, next-generation telecoms and other fields.
Beijing could offer to drop its claim to being a developing economy, a status it insists on despite having become one of the biggest manufacturers and a middle-income society, Leering said. Under WTO rules, that allows the Communist Party to protect industries and intervene more in the economy.
Giving that up “would be a very important gesture,” Leering said.
Trump’s opening shot in 2017 was a tax hike on $360 billion worth of Chinese imports. Beijing retaliated with tariff hikes and suspended soybean imports, hitting farm states that voted for Trump in 2016.
The U.S. trade deficit with China narrowed by by 19% in 2019 over a year earlier and by 15% in the first nine months of 2020.
That failed to achieve Trump’s goal of moving jobs to the United States. Importers shifted instead to Taiwan, Mexico and other suppliers. The total U.S. trade deficit dipped slightly in 2019, then rose nearly 14% through November last year.
Meanwhile, the Congressional Budget Office estimates tariff hikes cost the average U.S. household nearly $1,300 last year. Businesses postponed investments, undoing some of the benefits of Trump’s 2017 corporate tax cut.
A study by the U.S.-China Business Council and Oxford Economics found the U.S. economy lost 245,000 jobs due to the tariffs. It said even a modest reduction would create 145,000 jobs by 2025.
Trump stepped up pressure by cutting off access to U.S. technology for telecom equipment giant Huawei Technologies Ltd. and other companies seen by American officials as possible security risks and a threat to U.S. industrial leadership. Americans were ordered to sell shares in Chinese companies Washington says have links to the military.
The Communist Party responded by vowing to accelerate its two-decade-old campaign to make China a self-reliant “technology power.”
Psaki, the White House spokeswoman, said Biden also was reviewing those issues but gave no indication of possible changes.
Biden wants to hold Beijing accountable for “unfair and illegal practices” and make sure American technology doesn’t facilitate its military buildup, Psaki said.
Biden’s envoys have the option of fine-tuning Trump’s penalties by dropping some in exchange for Chinese policy changes, said Kuijs. But he and other economists say rolling back tariffs and curbs on access to technology and financial markets is unlikely to be a priority.
“It is difficult to see a U.S. reversal of the recent hawkish trends in China policy,” Sylvia Sheng of JP Morgan Asset Management said in a report.
Tech curbs are unlikely to be eased because Washington “regards China as a competitor,” said Tu Xinquan, director of the Institute for WTO Studies at the University of International Business and Economics in Beijing.
Tariff cuts look like the only short-term option, Tu said. He said Biden could defend getting rid of taxes the World Trade Organization says were improperly imposed.
“In that case, he wouldn’t lose face,” said Tu.