US-China trade war: Beijing’s ‘best efforts’ defended after failing to meet trade-deal terms

• Former head of think tank under commerce ministry defends China’s ‘very good’ purchases and says failure to meet its commitments was due to ‘a variety of reasons’
• Recent deals between US and Japan, European Union to resolve tariffs raise hope that Washington and Beijing could return to the negotiating table

China put forth its “best efforts” to meet commitments it made in the phase-one trade deal with the United States over the past two years, despite falling well short of targets, according to Chinese experts who are now calling for substantive negotiations to expand trade and resolve Trump-era tariffs.

Beijing bought about 57 per cent of the American goods and services it had committed to purchase under the agreement, and the total was “not even enough to reach its import levels from before the trade war”, according to a scathing report released on Tuesday by the Peterson Institute for International Economics (PIIE), which described the once-ballyhooed trade deal as a “historic failure”.

But the former head of a think tank under China’s Ministry of Commerce says the result was “very good”, given the impact of the pandemic.

Huo Jianguo also criticised the US for taking Beijing’s shortfall in its purchasing commitment as an “untenable” excuse to keep pressuring China while showing no willingness to proactively reduce the additional duties on Chinese products that Washington imposed during the trade war.

“The implementation of any agreement requires both parties to cooperate with each other. The supply chain in the US is in shambles, and ports are unable to ship goods,” Huo said, noting that China’s failure to meet its commitments was due to “a variety of reasons”.

“China has done its best and has imported as much as it could and should have.”

Lu Xiang, a US-China expert with the Chinese Academy of Social Sciences, agreed it was not the least bit surprising that Beijing fell short of its purchasing commitments in the recently expired phase-one deal, given the global supply-and-demand shocks in 2020 and 2021, along with an ongoing labour shortage in the US.

“It would have been a miracle if [the target] had been achieved … Coupled with the fact that the US tariffs have never been adjusted, none of the aspects were conducive for China to complete the purchases,” Lu said, adding that the estimated percentage was the “result of China’s best efforts”.

The purchasing targets set forth in the deal were unreasonable from the start, according to Shi Yinhong, a Beijing-based academic who advises the government on foreign policy issues.

He said the terms of the deal were simply beyond China’s capability, and that outcome was worsened by the pandemic.

“Even so, China still bought a lot of American agricultural goods,” he said.

In the phase-one deal, signed in Washington in January 2020, Beijing committed to buying an additional US$200 billion worth of American goods and services from 2020-21, relative to 2017 levels.

However, China “bought none” of the additional amount, according to the PIIE analysis.

“If you want to talk about [the subsidies issue], we can talk – I think there is nothing we can’t talk about – but we have to do so with sincerity. Now the US seems to be insincere,” Lu said.

Last week, the US’s deputy trade representative, Sarah Bianchi, said the two countries were at a “difficult stage in the relationship”, and stressed that China’s state aid to companies and non-market economic policies and practices were a “serious threat to American economic interests”.

But Lu expressed optimism that the US will turn its attention back to trade negotiations with China, having already reached deals with Japan and the European Union to resolve steel and aluminium tariffs.

“The complementarity in trade between China and the US has not changed at all,” he said. “If the US improves its domestic supply chain this year, if tariffs are adjusted, and if there are more negotiations between the two sides in other aspects, there is still great hope for a substantial increase in bilateral trade this year.”

Huo agreed that China and the US should return to the negotiating table to resolve practical impediments to trade, including the lifting of Washington’s punitive tariffs and China’s continued expansion of imports.

“It is contradictory to ask China to expand its imports without abolishing tariffs,” Huo said.

But he also conceded that the stalemate could go on for some time.

As to the current state of affairs, Shi said: “The US and China have been in contact with each other on trade, but neither side defines this as a ‘negotiation’, because it is really not a negotiation.”

He also said that while “both sides have been very tough” in their exchanges, the US is still “showing hostility against China in trade”.

And if taking into account the US’s efforts to constrain China technologically, he said, “the pressure exerted by the Biden administration on China has been further deepened, widened and escalated”.

Author: Orange Wang, SCMP